Friday, May 25, 2012

The Bigness of Big Data.




If everybody is talking about Big Data it must be something very cool, don’t you think? Every day the term is mentioned in newspapers, websites, schools, business meetings, conferences… Currently, Big Data is all over, and that is exactly why we are writing about it.
EMC^2’s video which we featured last week helped us a lot in understanding what Big Data is all about, now let us present our interpretation of this in-vogue tech concept.
Massive amounts of data which cannot be handled with conventional tools are Big Data (BD). Imagine analysing all tweets posted in one country in a day, using conventional data base tools, tricky, right? There is so much information available in our world that it is becoming very problematic to use it. Big data applications allow people or companies to solve problems, converting unprocessed data to useful information.
Two of the big players in this market, IBM and EMC^2 identify three main dimensions of Big Data:
·      Size: Big data is certainly big. Data is available in enormous quantities.
·      Speed: Data is generated extremely fast. To be competitive, users need to process and to analyse the data very fast.
·      Variety: Data come in many forms and from many different sources. (Dates, Names, Bank Accounts, Bar Codes, Videos, emails, Tweets, Web Sites, etc.)
Big Data is useful in a wide range of contexts, some of our favourite applications: Electronic Payment for private or public companies. Agile analytics in the Stock Market. Business Intelligence for new ventures. Security: predicting or detecting fraud, And Data Warehouse in Social Networks.
Big Data is a tool which creates competitive advantages in business. Getting updated information from many more sources, and processing data faster will enable companies to understand their markets better, to anticipate crisis, and to make intelligent decisions. Those extracting value of the existing and growing data will be ahead of the competition. That is for us, the “bigness”, of Big Data.

As always, more on this topic in the coming days…


The image used in this post is a piece named Electress by Nick Gentry. He is British artist who recycles tech products like floppy disks to create his paintings. http://www.nickgentry.com/index.html

Monday, May 14, 2012

How big, really is BIG DATA?


Are you still asking yourself: How big, really is BIG DATA?

Listen to Patricia Florissi who explains in an easy way some of the key concepts of BIG DATA on this didactic video.
Patricia is the CTO of EMC^2, one of the largest providers of data storage and management platforms in the world (Cloud Computing).  EMC Website
   
Some key facts to remember:
“…. By the end of the decade (2020) the amount of data generated will be 50 times the amount of data generated today.”
“… One of the not so secret secrets of BIG DATA is that it is fuelled by the very properties of the cloud…”





Comments & Contributions welcome!

Sunday, May 13, 2012

Part 2 - Our Review of Big Data’s Impact on the Financial Services Industry

Big Data Brings Transparency, one of Wall Street’s Biggest Fears!

(Part 2 of 2)

What new Big Data has Become Available to Change Things???

Along with better systems to process large amounts of data, the introduction of FINRA TRACE trade data (A Regulatory Function) for many OTC securities is now readily available to the financial community.  What was previously a non-transparent market is now open information to everyone!  In some markets however, Big Data is leading to market inequality, with high-frequency trading many investors, mostly hedge funds, have access to data very rapidly and are equipped to have trading decisions made with algorithms faster than the rest of the market is able to (also referred to as “algo-trading”).  Although competitive regulation around this is in the works in many regions, it is questionable whether high frequency trading has an overall material impact on the markets.

Increased Transparency from Big Data is now REVOLUTIONIZING Traditional Bond Markets
Traditionally, OTC markets have been profitable for the Broker-Dealer community, since due to the lack of relevant trade transparency, they have been able to earn more profits through a higher risk premium and higher bid-ask spread, in some cases up to 2% of market value.  This means a Bond worth USD 2m, a single trade is roughly $20k of revenue for a nearly no-risk execution trade for the broker dealer that can take minutes to execute!  That profitability model certainly does not sound sustainable.

With the availability of Big Data including TRACE pricing and other relevant investment financial data (Bloomberg, Reuters, StatPro, etc), the justification for the Traditional Sales based Broker Dealer OTC market model is waning away for many asset classes.  Because of this, investors become more price sensitive to the fees they are being charged by investment banks and overall fees have dropped tremendously.
 “Corporate and sovereign-bond deals around the world generated a total of $13.6 billion in fees for bankers, down from $14.9 billion in 2010, according to data compiled for Bloomberg Markets’ ranking of the best-paid investment banks.”  BusinessWeek - SOURCE
In fact, many major global banks have closed shop on their OTC trading desks because they were simply not profitable.  For example, UBS closed the majority of theirUS desk in 2011.

How Banks Are Reacting to the Transparency of Big Data… 2 Financial Titans React with Bold Moves
Similar to the traditional stock exchange demise in the US, just last week, Goldman Sachs announced they were launching an online broker dealer interface that would swiftly undercut the fees of the traditional OTC street norms.  Roughly 2 weeks ago, another financial titan, Blackrock, announced they were launching a similar system under their Aladdin platform.  This means that in the last month alone, 2 of the largest and most powerful players in the financial services industry are realizing openly and committing time and resources to launching platforms that may announce the beginning of the end of the OTC nature of these markets.  These systems will match buyers and sellers and help alleviate the unnecessary costs of maintaining a costly sales force.  Other major banks on the street are expected to follow soon with competing products.

Big Data is making markets cheaper to trade, more efficient, more liquid and more transparent!  Net Impact is less transaction fees for the 99% to pay for
These are just initial efforts to re-work the OTC system and adoption by the investment community is still up for grabs and market share in this new market will bring out some fierce competition among banks.  Utilizing Big Data properly has made this possible and ultimately the end consumer (The 99%!) will reap the benefits of this by their investments having drastically lower transaction costs. 

More Reasons to Love Big Data to Come, Please check back!

Friday, May 11, 2012

Part 1 - Our Review of Big Data’s Impact on the Financial Services Industry


Big Data Brings Transparency, one of Wall Street’s Biggest Fears

(Part 1 of 2)
So last week we were a bit critical of Big Data, today we are going to share one of the many reasons why we love it.  Big Data is shaking up many industries and perhaps banking more than most!  When referring to the 99% regarding the Occupy Wall Street movement we personally think about failed banking oversight, government bailout packages, recession catalysts and excessive banking compensation.   Clearly there is room for improvement in banking fairness in the eyes of the 99%.  We think availability as well as proper utilization of Big Data in the Finance industry will overall help the 99% and we will tell you why in 1 word… TRANSPARENCY!  In many cases, Wall Street thrives on lack of transparency in order to hoard the little financial information available, and uses that info to profit against the 99%.
7 years ago, Big Data’s first major impact on Wall Street began, when Stock exchanges began to migrate towards electronic trading.  Average transaction fees went down, many specialist trading firms closed or consolidated, and the online brokerage model was able to thrive.  Big Data made this possible because it made information rapidly available to near automate the market making process.  These drastic improvements made possible by Big Data regarding transparency were only the beginning…
The “Subprime” Financial Crisis created an even Greater Demand for Big Data!
After the Subprime blow-up, increased regulatory standards were rolled out worldwide.   Risk management and process controls around financial services became a priority, and demanded better utilization of data.  Now, major investment banks have bulked up their risk management systems to a point where regulators are somewhat content as the regulation evolves.  The Big Data within major banks was not being utilized effectively and regulators needed to step in to put a universal risk framework in place to do so.  According to the notorious McKinseyBig Data Study that we love to refer to, Securities Trading and Financial Services have now generated and manage some of the largest numerical/text based databases in the world!

Big Data’s Next Major Impacts on Banking & Investments
Together with a new breed of cloud-based portfolio analytics and performance management solutions, data aggregators are providing an IT solution to a client service problem. Key to these alliances is the ability to turn Big Data insights into a beautiful, dashboard-like view of portfolio performance so that both portfolio managers and their clients get a complete view of a portfolio’s performance and have total confidence in the completeness of the information that underlies the big picture.”  SOURCE  -Andrew Peddar, CEO StatPro America
This is Transparency, exactly what legitimate value investors love and banks fear!  As Big Data in a useable format becomes quickly and cheaply available to investors and financial markets, the OTC (“Over-the-Counter”) business model is being constantly questioned for more standardized asset classes.  These OTC securities are traded outside of a formal stock exchange because the products are specialized and often need sales people to interact with buyers.  Some asset classes that still remain OTC are corporate bonds, municipal bonds and many of the troublesome mortgage bonds that were at the heart of the credit bubble. 
Big Data is starting to Revolutionize the traditionally profitable OTC space for major Banks...Stop back to find out why in Part 2 of our Financial Review in the next couple days!

Friday, May 4, 2012

I Always Feel Like, Somebody's Watching Me...



As we already know, the technology to handle the “Big Data” is already here, or at least – it’s getting there.  The business potential is HUGE.  Today, we are going to play “devils advocate”, and talk about the “other, darker” side to big data. A side that is very easily overlooked, in the Big Data craze, which is sweeping the Internet and IT industry.

When we go online, we start leaving behind data, and this is where the Big Data technology comes in.  As we read our e-mails, surf our social networks, read articles, blog, share photos, shop online, and basically – click away our day, we are like Henzel and Gretel, “leaving behind breadcrumbs of information” – as Gary Kovacs – CEO of Mozilla Corporation stated in a Ted Talk that was published earlier this week.  Mr. Kovacs talked about the vast amount of information, which is being collected about each one of us. With every click of the mouse, more websites begin to follow us, only a small fraction of them being websites we actually visit, and the number of the websites following us grow exponentially as our day wears on and we expand our internet based activities.

Let’s compare this to a “real” world situation.  In most countries, lawyer solicitation is illegal.  If one were to get injured in a car accident, and the day after being released from the hospital, a lawyer would call him offering him legal representation, normally our response would be: “how did he get my number, did the hospital give it to him?”   In the real world we do not fail to see the extreme invasion of privacy and the in-adherence to a certain moral code – and in the real world, in most countries, such a lawyer would actually get disbarred for taking such action.

Now let us conduct a small experiment – go into your Gmail account, and draft an email to yourself.  Title the e-mail “car accident”, and in the body of the mail type in the sentence “I was involved in a car accident”. Now this varies from one user to another, but we are willing to bet that when reading the self-sent mail, you will see on the right hand side of your screen, ads promoting different aspects of the automotive industry, in our case, we got mostly ads for car repair services.   6-7 years ago we all thought this was pretty cool, well it doesn’t seem so cool now…  And again we would like to ask, why is this behavior, which is so intolerable in the “real” world, so accepted in the virtual space?

But surfing habit tracking is only a small part of it.  As businesses utilize Big Data tools more and more to analyze market behavior, and aid their human counterparts in making pricing decisions, more ethical issues are addressed.  Derrick Harris gives the example of landlords utilizing Big Data analysis in order to analyze rental market behavior and maximize rental prices and profit, while totally disregarding the human side of the equation.

Now don’t get us wrong, we love Big Data! We think its business and social implications are huge, and as we mentioned in the beginning of this post, we are only playing “devils advocate”, giving you something to think about over the weekend.

See you next week…