Economy

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Trends for top talent.

Skills become obsolete just as quickly as new talents are needed; continuously evolving as the world around them change.

The P4Capital team investigates what skills are desperately needed in the capital markets today, and how companies can capture them.

Stay tuned.

Transcript


Amanda: Who are the people your company should be looking for? What skills should you have to make yourself appealing to those employers? In this week’s round table discussion, the P4Capital executive team examines who the top talents are, and what skills they possess.

Stay tuned.

Jim: Today’s topic is about what needs we have seen in the technology/ capital markets area since the beginning of January of 2015.

Archana: For those of you just tuning into our weekly podcasts, a quick round of intros – we are the P4Capital team. A division of the established Planet4IT staffing agency, and we are the people who are close to the market makers – the Capital Markets as well as the wealth management professionals. And yes, we are nearing the end of the of the first quarter, and what we plan on doing, just like Jim said, just discussing in terms of where financial technology stands, and also a quick handbook for job aspirants; what are the skills that would be in demand for the rest of the year.

Shaheerah: I just want to start out with the importance of the capital markets: capital markets are where  both Canadian and International companies from all over the world come to raise capital in order to run their businesses and to expand globally. And it’s going to be done both through debt and also through equity. And Capital Markets is also a place where companies can come out and they can seek advice on potential transactions and strategic advice on implementing their business plans. And although this is a male dominated industry, there is now a growing need for women in the field as well. And you will see a lot of companies are launching new programs in order to attract more females into this career.

Jim: The interesting part is in the trading side of the financial institutions business, is we’ve gone through 36 months of high frequency routers, dark pools, low latency – and the rationale behind all that was to get better analytics on the trade, get better understandings of liquidity; obviously there’s been a heavy influx of new regulations and reporting. And that’s kind of affected the old creaky systems that have populated the world. So the talent, not only are we looking for the best and brightest of the female and male side, but we’re also looking for difference makers now too. And we hope to carry on more conversation about that momentarily.

Jeremy: Risk Data Aggregation and Reporting, RDARR* as it’s written sometimes, seems to be a big hot button topic for all of our clients. There’s a Basel 3 deadline with 21 months to go now, December 21 2016 that needs to be met, and all the banks and financial players in town need people who understand risk and are able to put it together into a model that will make sense for decision makers.

Archana:  Some of the trends that we’ve witnessed so far, and something that we’re definitely going to see more of, going forward, obviously the falling oil prices that’s been a hot button topic really, and a lot of the banks and financial services companies have been majorly impacted with the falling oil prices. Another thing that’s happening that we’ve witnessed is restructuring: a lot of banks are shutting down and really focusing on their core business and trying to automate a lot of these processes that don’t really have direct customer interaction. Another thing that we’ve witnessed, and this is definitely a growing, trend is  I call it the deconstruction of the traditional walls that have surrounded the large investment banks and how they’ve been privy to customer information and access to all this data. So this deconstruction obviously is happening as we speak, because access to data in this changing market is majorly on the rise. And another growing trend where banks are losing out on hiring talent is definitely to the digital guys, so banks are revamping their strategy to attract the brightest minds that are out there.

Jim: The position growth, if you will, I’ve also kind of thought to myself was interesting it’s core programming: Java, C, C#, C++. I  haven’t as yet seen the advanced analytics programming needs that the digital world is demanding, the R’s, the Matlabs, s and those types. We’ve also seen a heavy influx of business analysis. So people, as Jeremy alluded to, anything that has a strong element of risk process knowledge is in great demand out there. Traded products, front office products – also in great demand out there. Traditional, other support jobs like software package support or infrastructure support, not as much. But hardcore developers yes, hardcore business analysts with solid process knowledge, yes.

Archana: I agree with Jim that we haven’t seen so much of big data and data analytics on the capital markets, side, but I do think that’s something that’s set to change going forward. A lot of these data scientists have been employed by these capital markets firms. They’ve largely been restricted to governments, risk and compliance areas, but increasingly they are going to be used in the front office, and working hand in hand with the Quant guys.

Jeremy: Especially when we get to the phase where banks are going to be analyzing data in real-time, they’re really going to bring in some new and dynamic solutions. We’re really going to see that in the next year.

Jim: I’m hoping though that those people are still available for them Jeremy. We’ve seen in our Planet4IT part of the business, where people with knowledge of how to program advanced algorithms are being captured by game companies, big market data companies that have a service feel to them. And where do they draw them from? Obviously the traded markets, and the people that learned their skills there and have applied them successfully, and they’re being offered great sums of money to do so. I’m 100% in agreement that the front office people will have to come back onto the market, but I think they’re being overshadowed right now by the need for regulation people.

*RDARR stands for Risk Data Aggregation and Risk Reporting program


 

That was the P4Capital team discussing the Trends for Top talent, and how to be competitive in the workforce. Want to know more? Check out our website  and previous posts at www.planet4it.com or follow us @p4capital. Thanks and see you next time.

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Maybe stress the stress test.

In this weeks P4Capital discussion, the executive team continues to talk about something most of us try to forget – the great recession of 2008.

In a follow-up to the stunning news of all the American banks passing part one of the stress test we have some bad news – a few banks didn’t in fact pass part two.

The P4Capital team investigates what this means, and how it will protect the world economy should the worst come to pass again.

Stay tuned.

Transcript


Amanda: So much for our winning streak. Several american banks couldn’t hold it together in the final inning, and failed part two of the stress test. The P4Capital team continues their discussion about what these results mean for the future of the economy, and what these banks are going to do about their failing grades.

I don’t think they can simply apply for extra credit.

Jeremy: All right, this week we’re doing part two in our Stress Test series. A couple of big European banks just failed the Stress Test in New York – Deutsche bank and Santander of Spain.

Archana: Apparently even Bank of America just received a conditional pass. This was part two of the stress test which actually happened last week, in which all of the 31 banks were cleared. Part two was essentially in order to assess their terms of raising capital by way of dividends, and these two banks essentially failed.

Jeremy: Bank of America’s actually going to try to do about 4 billion dollars into share buybacks, which they got the green light on. So Deutsche bank and Santander are going to face penalties where they can’t do any share buybacks right now, or raise dividends, but they’re still able to issue the dividends as they stand

Amanda: What does part two entail?

Shaheerah: Well it’s called the Comprehensive Capital Analysis and Review, CCAR. And basically these banks that failed, now they have to make some changes in their plans or they could have to pay some financial penalties. Basically, it prevents these US entities of the foreign banks from distributing any capital to their parent companies.

Jim: With that said, the question Amanda asked was what does this all mean? It means basically that the United States has said that either you’re going to have enough cash to be banking in the US, or you’re not going to bank in the US. As simple as that. They want a very strong and healthy financial system to spur their growth into this new age of technology meeting business and new entities being created, which should sustain their economy for the next three to five decades.

Archana: I’m just curious to hear the thoughts of the P4Capital team here – do you think the introduction of these stress tests and various levels of scrutiny – what do you think about another 2008 like meltdown? Do you think we could avoid another one of those again?

Jim: Not a chance. As the elder statesman at the table by a considerable factor so, I have seen these financial games in various shapes and forms over four decades, well – let’s call it five. And there will be a new game at hand somewhere, sometime in the future, but the objective here is to get stability for at least a 10 year run, and then let the governing bodies a decade out from now worry with what’s on their plate at that point in time. But quite bluntly, we’re in full economic recovery right now Archana, but it is so tender. It could not support another meltdown of the magnitude that was unprecedented by the way, that happened in 2008.

Archana: I would actually agree with Jim. To me, the only constant there is change. And we’ve all witnessed this within the Capital Markets environment. Yeah I mean, this is a way for stabilizing the marketing and the economy as it stands right now, but 10 years from now something else might just crop up and the regulators at that point will try to put checks and balances in place too.

Jim: The interesting part about these Stress Tests, that’s probably also illustrative to all those other financial institutions is the absolute weakness of the underpinnings of technology. I had this discussion last week with a senior banker in downtown Toronto, and we talked about their base engine technologies, which was something that the group 20 years ago installed. So now, you’re trying to run a multi trillion business using ancient, antiquated technologies. It should be very interesting as they continue to work on stress tests to see if these banks, in this case the group of 31, are going to be able to sustain it in the future or not.

Jeremy: I think what caused the financial meltdown revolved around derivative products; credit derivatives, swaps, CDS’s they were called. That was-

Jim: MBS’s

Jeremy:-right, mortgage-backed securities. Basically predicated on the fact that banks were issuing mortgages to just about anyone with a pulse, and then bundling those mortgages off as fast as they could into securities. There were three different levels of risk – they were called trenches. The lowest trench were all sold at one price – medium. They had another price – the top-level; senior level they were called. Wasn’t even that much of a risk premium that companies were taking – companies such as AIG — and there ended up being massive defaults across all three levels of risk. Lots of problems there, and here we are six years later or so, and there is still not a clear picture of what risk looks like on balance sheets, especially in the derivatives business which is largely unregulated. There are lot of measures to see how they can measure this risk better, but we’re not there.

Jim: Yeah, but that’s symptomatic Jeremy. You know any time you try to modernize debt you’re running risk, full stop. Debt is debt. But the interesting part were the reverberations in the marketplace of 2008, and how it brought the global economy down to its knees, almost overnight. So, I look at it again and say can that game of taking, using your words – providing debt mortgages to anyone who can apply – is that going to be game on in the future? I doubt it

Jeremy: It will be a different game

Jim: Maybe it will be a different game, absolutely! We don’t know what that will be.

Jeremy: Maybe it’s going on already?

Jim: I would suggest it probably is, going on already.


 

That was the P4Capital team discussing the Stress Test, and what these failing grades mean for the banks going forward. Want to know more? Check out our website  and previous posts at www.planet4it.com or follow us @p4capital. Thanks and see you next time.

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The rise of the cryptocurrency

We live in a cashless society, but are we on our way to a universal digital currency? Bitcoin may seem like a digital currency for a digital age, but is it really? We investigate in this week’s round table discussion.

Transcript


Amanda: We’ve talked about Bitcoin before at the P4Digital Blog. It’s a topic that fascinates us, but 2014 was a rough year for it. In this week’s discussion, we talk about the rise of the cryptocurrency, how it works and speculate on whether or not we’ll all be paid with it in a few years.

Jeremy: Hello, today we’re talking about Bitcoins. Do they now have a legitimate trading exchange?

Archana: Yes, the topic we’re talking about today is the roll out of a new US-based exchange called Coinbase, which hopefully does legalize the cryptocurrency. What are your thoughts?

Shaheerah: Okay, so basically just to define Bitcoin in very basic terms, it is virtual cash that is generated, or rather mined by computers. It is a very sophisticated process. And Bitcoin lives on the internet, and you can use it to buy stuff both online as well as offline. In late January of this year, the Coinbased Bitcoin exchange went live. And this is actually the first one in America. And it could make Bitcoin more of a reality for the average Joe, as well as the corporate financial role. So as of now the exchange has been approved in 24 American states, and previously in the US the Bitcoin traders had to use exchanges that were based outside of the USA. And those exchanges did not have adequate regulations or security and so it made it pretty risky. So for example in February of this year, a Japan based Bitcoin exchange collapsed and they lost 750,000 customer Bitcoins, as well as 100,000 Bitcoins of their own. There are also all these problems with the security hacks. So for example recently Bitstamp lost 19,000 Bitcoins worth 5 million dollars, so that’s a lot. But now what’s going to happen is the Coinbase exchange is set to be a game changer because it is better regulated. They do have better security including insurance, which the other exchanges did not have. They have encryption, and the Bitcoins are actually kept offline so you won’t be able to hack them. There is also a one-time use passcode that you have to use, it’s texted to your phone and every time  you want to log in you have to use that one-time passcode, and you have to use the same computer every time as well.

Jeremy: Yeah, the Japanese exchange that Shaheerah mentioned is called Mt.Gox, which apparently is short for Magic the Gathering, which is a Role Playing – some type of Role Playing Dungeons and Dragons type game. So that’s not really the most credible way to be trading your Bitcoins.

Amanda: Speak for yourself! I’ve played Magic the Gathering and it’s an intense game!

Archana: Again, sort of going back to what Shaheerah mentioned, primarily the lack of regulation, inadequate security and the difficulty in getting US dollars in and out of these exchanges being the primary reasons why Bitcoin hasn’t really taken off. Coinbase really seeks to make a difference because it’s being backed by some thoughtful investors and financial venture capitalists, including the NYSE and the Citigroup CEO and Thompson Reuters ex CEO as well, so it obviously does lend a huge deal of credibility. And like what Jeremy mentioned, the Japanese company – a lot of luster was lost of Bitcoin amidst all these scandals and different scams. Case in point would be the Japanese Bitcoin exchange. And also more recently a Slovenia Bitcoin exchange also collapsed. So Coinbase does seek to differentiate itself from the rest of the crowd. What remains to be seen is how successful they’ll be.

Jeremy: And right on the heels of Coinbase is another exchange that is going to be launched later this year, which is backed by the Winklevoss twins of Facebook fame, called the Gemini exchange. So they’re not narcissistic at all! Anyway, this exchange is going to be partnered with a major US bank, which means your US cash deposits will be eligible for FDIC insurance, although I’m sure the Bitcoins held in there will not.

Amanda: It’s interesting. Amazon and I believe PayPal also are accepting Bitcoins as of last year for payment for certain transactions.

Archana:  Yes, just like what Amanda just mentioned, apparently Coinbase also already accounts for about 2.2 million consumer wallets, and nearly 40,000 merchants already use their services. So from this point on it’s really a matter of them consolidating their position and building the business.

Shaheerah: Yes, and I also wanted to share some other facts about Bitcoin, which were published in an infographic from whoishostingthis.com. The FBI actually owns 15% of all the Bitcoins in the world. 65% of the world’s bitcoins are inactive – so they’re just left in the Bitcoin ewallets, and the remaining bitcoins are what are actually used for the transactions. You can get stuff like Pizza and plane tickets and university tuition using your Bitcoins. And even former Spice Girl Mel B, she was the first artist who started accepting Bitcoins as payment for her music. There’s also a maximum number of Bitcoins that can ever exist. The last Bitcoin is predicted to be mined in the year 2040.

Amanda: Make myself sound like a bit of a Geek here, but Mel B was always my favourite Spice Girl.

Laughter

Jeremy: Jim too

Laughter

Jeremy: Well, the problem with Bitcoins is they’re really too volatile right now to be used as an integral part of our trading economy. I mean, it would be kind of foolish to ask for your pay cheques in Bitcoin because the value fluctuates so much. I really think that if they built a good, secure system and a means of transactions- I think they’re going to around for a while, it’s not going to be worthless, it’s always going to be worth something. But to make the jump between something that you horde and something that you use to spend money on, the question is when that’s going to be.

Amanda: I have a general question for the executives here. If it was more secure, would you ever consider accepting your salary in Bitcoins.

Jeremy: I would not accept my salary in Bitcoins right now – not the way it fluctuates.

Archana: Not right now, but really whether we like it or not I think digital currency is definitely going to be a part of our lives in the coming future. Whether its Bitcoin o some other form of digital currency, I don’t know but for sure, salary one day would be in the form of Bitcoins.

Shaheerah:  And I just wanted to add, that actually Bitcoin has been known to lose up to 80% of its value in just a few days, so yes it is very volatile. And in fact both Thailand and China had put bans on Bitcoin back in 2013 for this reason.

Amanda: So that’s a no on accepting it on your salary, huh Shaheerah?

Shaheerah: Yup, that’s right.

Amanda: I have to say, after hearing that last statistic, I have to agree.


 

That was the P4Capital team discussing the rise of Bitcoin and Crytopcurrency. Apparnetly, none of us want to get paid with it in the near future. Want to know more? Check out our website  and previous posts about Bitcoin at http://www.planet4it.com or follow us @p4capital. Thanks and see you next time.

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Do Canadian trading platforms need to be modernized for global purposes?

Is Canada falling behind on global trade?

In a world in the throws of the Digital Revolution, the only constant is change.

There are several major trade regulation changes coming in 2014, unprecedented in both number and magnitude.  These changes affect every company that imports into, or exports from, Canada or the U.S.  Some of these regulations require new licensing, and others mandate significant software updates.

Getting trade right is important not just for the economic growth it can create in Canada, but for the signal it sends to North America’s partners.  If North America fails to show leadership and surrenders the chance to be leading the way in the worlds most significant trade partnerships, others will step forward to fill the void. Now-a-days, thanks to the growing powers of Russia, India, Africa and Asia, that void would be filled within moments and be almost impossible to reclaim

Can Canada keep up in that face of all this competition?

P4Capital

Jim:  Over the last few years our trading software has grown stagnant. Oh sure,  the interface has gotten more colourful and interactive, but the core application hasn’t changed at all since it was bought. It’s like you bought a box with a pink ribbon on it. Eventually, the pink ribbon got tattered, so you but a shiny new yellow ribbon on it – but the repair was strictly cosmetic.  The box is still the same. The software that the Canadian banks bought is that box. It was purchased from the late 1980’s to the year 2000. They were able to do whatever they needed to do in those time-frames, but they’ve been lacking for anything new for the last 15 years. In other words, any changes have been strictly cosmetic.

Now you have “giants on the marketplace that were never there before, and those original trading platforms were never made to handle these new behemoths. So the question Canadian traders have to ask is am I happy making the money I’m making, or will these new competitors push me to the sidelines?”

Jeremy: The Canadian trade foundation was based on the 7.5 hour trading day. That model was based on the New York model. In Shanghai today however,  those building never go dark.

When 7.5 hours was the norm, when the ‘bell ends’ traders would take all the results of that day, sum them up, then batch send them to the accounting department. Everyday they would do the same thing and be told by the start of the next trade day how they were doing. Now there is no break in the day for batch updates;  you have to do it in real time. You don’t have an off hour to calculate – so your risk models are lacking.

Archana: The crash of 2010 is a constant reminder of the need and importance to bolster fall-back mechanisms – where the modern systems can apply a hard stop to free-falling stocks. Business is much more complex now than the antiquated systems that were built several years ago. As Jeremy said, stocks are trading 24/7. There is a race to gain supremacy, be it in terms of the overall market reach, or its impact. Not only that, but we are in the midst of a global economy where exchange is happening in multiple currencies. We need a sophisticated system that can counter faulty trades. For us to stay afloat in all of these emerging markets and to be counted as a viable player, our technology needs to be modernized.

P4Capital

What do you think?

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