Investor Brain

Saturday, April 29, 2006

Currencies, Anyone?

ONLINE TRADING ISN’T JUST FOR FOLKS WHO TRADE STOCKS and options. Some Web-based brokers appeal specifically to those with an interest in trading currencies, commodities and other instruments.

OANDA (http://fxtrade.oanda.com), which was launched as a Website that provided exchange-rate quotes in the late 1990s, morphed into a foreign-exchange platform called FXTrade in 2001. Based in New York City, it has about 15,000 customers, but more than 100,000 have “demo” accounts that allow them to trade currencies with model portfolios, not real money. The platform makes extensive use of price/time graphs.

Late last year, OANDA introduced an options contract called FXBoxOption, which allows a customer viewing a price chart of a particular currency pair, such as the U.S. dollar and euro, to indicate via a box on the chart where the price, or exchange rate, is likely to be at a subsequent time, be it five minutes or six months later. The system then calculates the payout that would accrue if the price of the currency pair in question reaches the level stipulated. Lower-probability price targets have higher payouts, and vice versa.

Once the payout is calculated, the customer can decide whether to purchase the option and, if so, how much to invest. If the price hits its target by the prescribed time, the customer receives the payout. If it misses, there is no payout.

This option is intriguing, though risky, because it is priced in real time after the customer defines it. As noted, it can be held for minutes or months. BoxOptions aren’t traded on any exchange; they are a contract made between the customer and OANDA. You can learn more about BoxOptions at http://fxtrade.oanda.com/boxoption/.

Like most forex-trading firms, OANDA doesn’t charge commissions. Instead, it collects the spread between bid and ask. Spreads are relatively tight; the U.S. dollar (USD)/euro spread is 11/2 pips, though some pairs have much higher spreads. (A pip is 1/100th of a cent.) The pound/yen spread, for instance is 6-to-6 1/2 pips. The spread is the same whether you’re trading a lot of $1,000 or $1,000,000, which is somewhat unusual. Many other forex firms tighten the spread as the size of the transaction increases.

Another key component of forex trading is utilizing leverage. Stock and option traders know this practice as trading on margin, but their use of margin is significantly less than that employed in foreign-exchange trades. OANDA lets customers enter a trade with 50-to-1 leverage, and lever up to 100-to-1 to maintain the position. If the price moves against them, they either have to liquidate the position or put up more money to maintain it.

OANDA has no minimum for opening an account, and you can trade lots as small as $1. Interest accrues by the second, rather than on a daily basis, which is customary.

SOME BROKERS LET YOU TRADE COMMODITIES ONLINE, though most restrict you to electronically-traded contracts such as S&P 500 futures. Xpresstrade (http://www.xpresstrade.com) offers 24-hour trading of electronic and open-outcry futures products, including crude oil and gold, around the world. Customers also can trade 20 currency pairs on the same platform. The firm provides access to more than 25 exchanges and more than 300 products. Based in Chicago, it has customers in more than 100 countries.

The Xpresstrade platform, developed in-house, runs from a browser using Java. Dan O’Neill, Xpresstrade’s principal, says the site aims to offer a full suite of trading tools and resources, including conditional and trigger-type orders. Many electronic-futures platforms operated by the exchanges don’t accept GTC (good until cancelled) orders, so the platform simulates one by maintaining it on the broker’s computer and on the exchanges for you. You can also place time-directed orders, which might, for example, work for 20 minutes and then be canceled, or activated, two hours after the order is placed.

All the quotes on the Website are real-time, offered at no additional charge. O’Neill says, “It’s a huge expense for us, especially the overseas exchanges, but our customers can’t afford to trade off delayed quotes.” The platform allows customers to trade futures/options combinations, such as butterflies, condors and spreads.

If you’re wondering how the commodities and futures markets work, Xpresstrade offers 11 self-study courses on its site that can be accessed at any time. Topics include Oil Market Basics and How to Trade Futures.

Commissions depend on what you’re trading. Futures commissions range from $5 to $11 per contract. Options on futures are $10 per contract. Currency trades don’t carry a commission. Like OANDA, Xpresstrade makes its money on the bid/ask spread, which ranges from 3 pips (USD/euro) to 15 pips (euro/Australian dollar).

Published in Barron’s, April 24, 2006

Friday, April 28, 2006

In Search of Java

I purchased an espresso maker back in 1994 that did the job for me for over 11 years.  That included 2 1/2 years in Tokyo, where the machine had to be plugged in to a step-up transformer to work.  It typically took 2 1/2 to 3 minutes to make my favorite caffienated beverage, a wet cappucino. 

Still, it served me well, until that fateful day early last summer when an internal seal blew.

I sadly retired my faithful machine and went searching for a new one.  I drank drip coffee for a few weeks, but it just wasn’t the same.  My work suffered.  The level of caffeine in my system fell to dangerously low levels. 

Finally, I purchased a shiny Italian job for around $230 that promised a great capuccino.  As some of you might guess, I’m a bit of a gadget freak, and am able to follow directions even if they’re badly translated into English.  This machine’s instructions were so badly written that I ended up having to email the seller several times, only to find that they had failed to ship an important part.  Once the part arrived, I struggled with the machine for a few months, cranking out my two daily cappucini.  It would take about 5 minutes to brew each cup, which seemed excessive to me.  The attachment to steam milk was especially cranky. 

Then some internal part made a loud POP, and the machine stopped working.  So there I was, in mid-October, having killed a rather expensive piece of equipment. 

I did some more research, and picked up a cute little French number, which set me back a little less than $200.  Again, its workings were a little complex, and it would take almost 5 minutes to brew up a cappucino.  This one broke just before Christmas. 

Santa came through with another espresso machine for me that cost him/her about $150.  This one was somewhat more efficient, brewing up a cappucino in about 3 minutes.  After extracting the liquid gold through the coffee grounds, I would push a second button that heated the water up for steaming to a higher temperature.  One morning in March, shortly after finishing my annual review of online brokers, the machine made a loud popping noise, and spewed hot water all over the counter.  Fortunately, in spite of the low caffeine level in my bloodstream, my sprinter’s reactions got me out of the way of the geyser.

After several email exchanges with a nearly-illiterate technician, we discovered that the problem with this third machine was a small rubber ball that was supposed to be seated inside a spring.  Following the tech’s instructions, I disassembled the machine and found that the former ball had turned into rubber rubble.  The tech sent me a new one, apparently made of a better material, but the re-assembly process was not a success. 

This left me feeling that I had turned into a very efficient murderer of cappucino machines.  I felt deep despair at the thought of having to shell out big bucks every day so that my young pal Crystal at Peet’s could make me a couple of wet cappucini.  After killing 4 machines in only 8 months, I figured I should probably give up.

While wandering aimlessly, and in a low-caffeine state, around downtown Palo Alto last weekend, I noticed a board outside the Palo Alto Toy Shop advertising ... a coffee maker.  ?!???!  This seemed like an odd thing for a toy shop to push.  It turns out to be an invention of a local firm called Aerobie, which makes fun things to throw around, like the Squidgie Disc. 

One of their inventors came up with a brilliant device called the Aeropress Coffee and Espresso Maker.  I picked one up, figuring that a $30 experiment was worth my time.  This thing is nothing short of amazing.

First and foremost, it makes a great cup of coffee with very little fuss.  There are no fancy pumps or springs or internal seals to break.  The pressure that creates the flavorful brew is supplied by the user.  The device looks like a huge syringe, but without the needle on the end.  It takes about a minute to actually make the coffee; a total of two minutes if you count in setup time.  To create a nice foamy milk top for my cappucino, I bought a milk frother, so technically I am out about $55 for both pieces.  The frother is very simple—I heat up the milk in the glass container in the microwave, then whip up the heated milk.  I don’t have to generate steam in a machine that I will certainly just break in the very near future. 

I don’t think I can break the Aerobie very easily.  It simply doesn’t have the pieces that turn me into a Fatal Attraction.  It’s made of a hard plastic, so even if I drop it I can’t break it.  It’s very easy to clean, with no risk of scattering wet grounds all over the kitchen ... uh, no, I don’t know ANYone who would EVER do that .  The downside is that it makes one cup of coffee at a time, but most cappucino makers have that same restriction. 

I expect my productivity level to rise significantly now that I can efficiently caffeinate myself.  If you become an Aerobie Aeropress user, please let me know what you think. 

Saturday, April 22, 2006

Brilliant! Send This to EVERYONE You Know!

Don’t those emails that start off, “This is completely true!  Send it to everyone you know!” irritate you?  I find them a colossal waste of time.

So imagine my delight when I came across this delicious post from the Personal Tech Pipeline.  It starts:

“I’m repeatedly amazed that I still get e-mail hoaxes, always sent earnestly by relatives who have been suckered in. Give-away hoaxes ("Bill Gates"), sympathy hoaxes ("Little Girl Dying of Leukemia"), warning hoaxes ("Stay Out of the Mall on Halloween!"), chain letters ("Hawaiian Good Luck Totem"), urban myth e-mails ("Flesh Eating Bananas")—I’m sure you’ve gotten your share.”

The author, Mike Elgan, encourages readers to end email hoaxes by participating in one themselves.  He says, “I received yet another e-mail hoax yesterday, and thought: There has to be some way to educate the public. Millions have been educated about hoax e-mails—you almost never see technical people, for example, passing these around. The victims tend to be less computer savvy.

“So how do you reach these people?

“Then it hit me: E-mail chain letters! Why not write an ‘e-mail hoax to end all e-mail hoaxes’?”

I encourage you to read his entire article by clicking here:  Email Hoax to End All Email Hoaxes. 

Send this to everyone you know!! 

Monday, April 17, 2006

Back from NY

I’ve been traveling with my high-school-age daughter the last week, and haven’t been around to update the site.  We went to New York with my mom, had a wonderful time playing tourist, and saw three plays, all of which I would recommend for very different reasons.

Two of the shows focus on mother-daughter relationships, which I thought would be appropriate given the traveling party of grandmother, mother, and daughter. 

The first show we saw was “The Light in the Piazza,” at Lincoln Center.  The staging is innovative; I like the “stadium seating” in the theater, which puts the stage below the audience.  Victoria Clark has the main role as the mother, and her range is incredible.  I think the part is written for an alto, but at one point she is singing the higher harmony part in a duet with the actress playing her daughter, who is a soprano.  The sets are minimal, more suggestive than substantial, and the music is gorgeous. 

The second play we saw was very very different.  Lisa Kron’s “Well,” which is described as “a seriocomic investigation about wellness and the mystery of parent/adult child relationships.” This one breaks the fourth wall in several different ways.  It’s performed without an intermission, and you won’t want to miss any of it, so I suggest avoiding liquids with your pre-theater meal.  Kron weaves together stories of her childhood in an integrated neighborhood and her difficulties with allergies as a teenager, and questions why she is healthy now while her mother is afflicted with a variety of ailments. 

The press release describing the play says, “WELL opens with Lisa Kron’s mother sitting on a La-Z-Boy recliner in the middle of the stage.  As the play goes on to deal with Kron’s personal experiences of healing, a comedic coup d’état breaks out.  The actors critique the script, her memories conflict with her flashbacks, her mother interrupts with her own opinions, and Kron finds herself in danger of losing control.  The result is a hilarious and brazen piece that questions our thoughts on the conventions of both theatre and wellness.” That sums it up. 

Pieces of this show keep running through my mind.  It’s funny as well as thought-provoking.  I highly recommend it.  Website:  http://www.wellonbroadway.com

We also saw a classic Broadway musical comedy, “Dirty Rotten Scoundrels.” I have a particular liking for shows with gratuitous dancing and senseless bursting into song.  Norbert Leo Butz is amazing, especially while performing the energetic “Great Big Stuff.” I’d love to bottle whatever he’s on and take it home with me. 

My older daughter is a junior at the University of Delaware, and is very involved on the production side of a lot of student-run shows.  Right now she is stage manager for the Harrington Theater Arts Committee’s production of “Jekyll and Hyde.” This show depends heavily on the actor cast in the dual role of Dr. Jekyll and Mr. Hyde, and they cast this one right.  Here is a clip of the very talented Chris Saltalmacchio singing “This Is The Moment." This song takes place right before Dr. Jekyll first drinks the potion that turns him into Mr. Hyde.  My daughter Colleen opens the curtain and organized the crew that moves the lab table into place—I’m so proud. 

We saw “Jekyll & Hyde” both Thursday and Friday nights, in an effort to be supportive, but also enjoyed it a great deal.  Unlike “Scoundrels,” this one does not have a happy ending, but it asks the musical question, “How does an individual integrate the good and the evil?”

Saturday we visited the gorgeous Longwood Gardens in Kennett Square, PA.  It was a beautiful day and the gardens were nothing short of stunning.  We saw gazillions of tulips, walls covered with orchids, banana trees ... wow. 

Then Saturday night we saw yet another show—UD’s Professional Theater Training Program’s production of “Rosencrantz and Guildenstern are Dead.” Very well performed rendition of a play I last saw in the 70s when it was being staged by the American Conservatory Theater in San Francisco.  The actors playing R&G (or is it G&R?) did a terrific job with the banter and the layers of language Stoppard writes.  The theater PTTP uses is tiny, but the production values are very high. 

Now it’s time to get back to work!  I have big plans for developing this website over the next couple of months.  Stay tuned.

Monday, April 10, 2006

In the Bargain Bin

IN OUR ANNUAL RANKING of online brokers ("Different Strokes for...,” March 6), six browser-based sites and three software-based sites earned less than four stars because of significant shortcomings, which include trade-execution problems, below-average design, loosely integrated research amenities, weak reporting or above-average costs. Even so, one of them may suit your needs, especially if you’re looking for rock-bottom commissions and can live with some of the shortcomings.

Browser-Based Brokers

TradeKing (http://www.tradeking.com) is the new kid on the block, offering very low prices ($4.95 for stock transactions, and $4.95 plus 65 cents per contract for options) and a slick Website. We also like the Probability Calculator, which gives TradeKing clients the ability to estimate the probability that a trading strategy will be successful. On the downside, you have to enter an additional password to place a trade, which seems to be an artifact left over from the late 1990s, and the order-routing technology is weak; it doesn’t get the best pricing. It’s the cheapest of the browser-based brokers, however, undercutting Ameritrade’s Izone by a nickel.

TradeKing’s CEO Rich Hagen contacted me after the article was published in Barron’s to say that the additional password is no longer necessary when placing a trade.  He also states that the order routing technology is in place, with the aim of getting customers the best price, but that he could not provide me with statistics backing that up since the company is so new.  We’ll keep an eye on TradeKing’s price improvement strategies as they develop a track record. 

Charles Schwab (http://www.schwab.com) has greatly improved its marketing, but the Website feels crowded, disjointed, and difficult to navigate. Schwab also fell considerably behind the pack in terms of trading technology this year, as customers can’t place trigger orders—orders that get automatically executed when a specific price or other target is reached—nor can they direct their orders.

Still, the site’s research capabilities are terrific, although they may not link easily to a customer’s portfolio holdings—you may have to do some spelunking through a series of tabs and tickers. Its stock picks also have been among the best of major brokerage firms ("Picking the Top Stockpickers,” Feb. 13). For investment neophytes looking to assemble a portfolio of mutual funds, Schwab’s research provides worthwhile guidance.

Balance and position reports are delayed for households with less than $100,000 in their accounts, and margin fees are on the high side. The firm recently stopped charging account-maintenance fees, and improved its portfolio-reporting capability—welcome news.

Ameritrade’s Izone (http://www.izone.com), another relative newcomer, was rolled out in early 2005 and ended up supplanting the late Freetrade. It’s cheap, but there’s no phone for customer service, as Izone is designed for those who are self-directed and self-sufficient. E-mail queries usually are answered promptly, however. In return for this no-frills approach, you get low commissions for stock trades—$5 for market or limit orders. There’s no online bond-trading capability, yet you get access to Ameritrade’s order-routing technology for stocks and options. Many Ameritrade tools are available—but at extra cost.

Wall Street*E (http://www.wallstreete.com) used to be one of our favorites, but the site has seen little updating in several years. We still like the prepopulated trade tickets and real-time account information, and the changes implemented last year for entering spread orders. The firm offers three levels of service, depending on how much your hand needs to be held. There are services for Spanish-speaking customers and for non-U.S. residents.

TD Waterhouse’s (http://www.tdwaterhouse.com) site has been cleaned up considerably this last year, and includes improved research and charting tools. It doesn’t offer smart- order routing or customer-defined order routing, however, and its options-transaction fees are on the high side. Margin rates are very high. We do like the new research layout; some of it can be viewed without logging into an account. TDW lets you access your account in many different ways—online, touch-tone, wireless, or by walking into one of its offices. The site will be rolled into the new TD Ameritrade later this year as the result of a merger of the two.

Firstrade (http://www.firstrade.com) has a promotion running through the end of April that gives new account holders 2.99% margin fees for 90 days. After that, they revert to their usual rates, which are currently in the middle of the pack. As with TD Waterhouse, Firstrade’s trading technology is weak, but its fees are much lower ($6.95 market and limit orders). Another plus for cheapskates: no extra fees to buy mutual funds online, provided you hold them at least six months. You can’t trade complex options online, but its bond and CD inventory is easy to search and trade. There are Chinese-language links available as well.

Software-Based Brokers

Here are three software-based offerings, two of which are from brokers that are primarily browser-based.

Power E*Trade (http://www.poweretrade.com) is a software application, but there also is a Web component. A recent redesign gives customers a complete view of their accounts, plus access to spiffy new charting tools. We like the Prepared Orders feature, which lets you create a list of up to 25 orders, which you can execute singly or all at once. There are some strange holes in the software platform, however, such as an inability to trade complex options. As with E*Trade’s regular offering, margin fees are high, while interest payable on cash balances is low.

ScottradeELITE (http://www.scottradeelite.com) offers a great introduction to software-based trading for the relatively active trader. But to run with the big dogs, it has to have better order-routing technology and the ability to trade complex options online. It’s got low barriers to entry compared with other software-based platforms, and could work out great for the newcomer to the field.

AB Watley (http://www.abwatley.com) lets users trade stocks and simple options online through its trading platform, but everything else must go through a live broker. Commissions range from $6.95 down to $1.95 per transaction depending on your trading volume. Watley definitely caters to active traders in OTC Bulletin Board and pink sheets, including Level II quotes for pink sheets. AB Watley also lets you access your account via a browser in case you’re away from your main computer.

Pairing Up and Bulking Up

Consolidation continues to be a major theme in the online-broker industry. Terra Nova Trading was thought by industry insiders to be on the block, and they were right.

RushTrade Securities announced that it has agreed to acquire 100% of the outstanding membership interests of Terra Nova Trading, which includes Market Wise Securities and Market Wise Stock Trading School. Both Rush and Terra Nova have been marketing themselves to day traders and hedge funds. According to a press release, the combined companies will have approximately 20,000 customer accounts and over $500 million in customer-account assets. Chris Doubek, Terra Nova’s president, says the rationale for the merger is to combine RushTrade’s proprietary trading software with Terra Nova’s back-end processing and clearing operation to create an entity that owns its own technology “from soup to nuts.”

Terra Nova now licenses Townsend Analytic’s RealTick software, which Doubek admits is “a little much” for the average retail investor. Doubek says that RushTrade’s trading platform offers about 70% of RealTicks’ functionality, but will be much less expensive to offer. It will continue to offer RealTick to its high-end customers.

Doubek adds that the combined firm plans to offer “very competitive” commissions, but will avoid the low end currently occupied by Interactive Brokers and MB Trading.

Thursday, April 06, 2006

Avian Flu -- Are You Ready?

The following post is way off (what I consider the) topic for this website, but I found it interesting anyway.  What follows is a press release from Accenture, a management consulting firm (formerly Andersen Consulting). 

It’s food for thought.  I wonder how many online brokerages have implemented an avian flu continuity plan? 

Are Businesses Prepared for the Avian Flu?

The thought of a global virus like the avian flu affecting more than a quarter of the world’s population is an unpalatable, but not impossible prospect. Such a pandemic would pose a very real and unprecedented threat to lives and livelihoods.

“The impact on human life could be catastrophic, but the potential economic impact to organizations across the world also cannot be ignored,‿ said Robert Dyson, Business Continuity Practice Lead in the United States for Accenture, the global management consulting firm. “It could have a personal impact on every person in the world.  If companies cannot sustain operations then they fail which means that people are put out of work.  When people are out of work they don’t get paid which has a direct impact on the individual’s standard of living as well as the economy.  This is why our governments have this issue on their agenda and are looking for full participation from the business community.”

A report by the US National Intelligence Council’s 2020 Project, Mapping the Global Future, identified a global pandemic as the single most important threat to the global economy.  Meanwhile, the London Chamber of Commerce reported that only one in five businesses would survive a 12-week outbreak of avian flu.

Of course, no one knows when or indeed if avian flu will transmute into a form that can be passed from human to human.  Yet, awareness of the possibility is already roiling health organizations, governments and businesses throughout the world.

Most importantly, according to Dyson, organizations must ensure that business continuity considerations are embedded in their general operations.  Its processes and activities, he said, must be considered in terms of how the organization would continue should a significant portion of the workforce become incapacitated.

“For businesses, anxiety levels should be rising fast,” said Dyson. “Companies would most likely face severe restrictions on international and possibly local travel, significant disruption to their supply chains as increased inspections disrupt logistics, and a potential general slow-down in business.  This would be particularly true for companies in the travel and hospitality sector, but it has the potential affect virtually every industry.”

Preparing for the worst

Businesses, said Dyson, need to understand the realities of a pandemic. 

“If people are too sick too work, they will still be too sick to work at home,” he said.  “In addition, school closures will force many employees to remain at home to look after children, and overwhelmed health systems will mean that many people diagnosed with the infection will have to be cared for at home, again limiting otherwise-healthy employees’ ability to work.”

Additionally, remote working will result in segregation of the workforce, convincing employees to avoid areas of mass congregation – such as an office environment – as well as situations like air travel where large groups inhabit confined spaces for long periods of time.  However, said Dyson, remote working is only part of the solution. Organizations should also consider identifying “skeleton” teams of key staff who would be the only ones to come to work in the event of a pandemic.  Primary and backup teams for key activities should be identified and organized on a split-shift, split-site basis to reduce the risk of cross-contamination.  Implementing a change freeze on all systems development will allow IT development staff to be redeployed into support positions if required.

Measures will also need to be taken within a company’s facilities, including the careful monitoring and maintenance of air conditioning, and additional antiseptic cleaning of key “at-risk” office facilities (e.g. telephones in a call center, consoles and desks in a data center operations bridge, etc.).  Even measures such as closing the site’s catering facilities and providing pre-packaged food must be considered.

Communication

Dyson and other business continuity experts believe that companies must keep employees aware of a pandemic threat, and up-to-date on developments and procedures followed. 

“The most effective way to maintain operations is to optimize the use of existing resources – particularly in the case of global companies, where scale and spread of operations can provide some protection,” said Dyson. “This includes making sure that methodology and approaches are consistent wherever the business operates, so that similar skill sets can be employed around the globe to service different clients. Work can be transferred from one location to another while maintaining consistent standards and results. 

“Clients should not notice any degradation in the service received. This approach is not just good business practice, but goes to the heart of a sustainable approach to business continuity.  The business continuity strategy must become part of the business-as-usual operating strategy.”

Many businesses - particularly in the financial sector - have already taken steps to ensure that an embedded approach to business continuity is a part of their operations. This required detailed planning to ensure that skill sets and capacities were matched, and that the impact of additional work flowing from one center to another did not critically impede the ability of resources in a new location to carry out their own work. 

Avoiding common problems

A common mistake that many companies make, said Dyson, is that they invest in continuity on a one-off, project-basis. 

“This means that continuity is assigned to a particular team of managers, who conduct a review, make recommendations and, maybe, implement plans and solutions,” he said.  “In this case, continuity fails to become part of the lifeblood of the organization and, as such, does not receive the attention and support it requires from senior management to ensure plans remain fit-for-purpose and up-to-date.”

To address the emerging threat of an avian flu pandemic, he said that organizations must first assess the ability of existing plans to cope with a significant disruption to the workforce.  Once any necessary updates have been made, an individual should be assigned to track developments with all emerging threats, and to determine any further plan updates that may be required.

“It is revealing to ask companies what they spend on business continuity,” said Dyson. “Often, the response will be that - in the absence of a specific project –little or nothing at all. However, data backup and storage, for example, are daily activities and most businesses maintain a redundant network. These are all business continuity-related activities, but are not often thought about in that way. To change this, senior management needs to move the issue of business continuity on to their permanent agenda. They must ensure that they can achieve an integrated view of all the activities and processes taking place within the business that relate to and support ‘business-as-usual’ operations in the face of unexpected and adverse events.”

A Preparation Checklist

Here is a checklist for businesses to consider in preparation of such an event.

1 – Assess specific risk. All companies are different – the environment in which they operate, their structure and their processes will determine the extent and relevance of specific risks to their business.

2 – Place a value on the disruption to particular processes and activities. How critical to business performance are the availability of particular functions, and what are the costs of downtime?

3 – Sort in terms of priority and investment in continuity the impact on high-value areas of the business.

4 – Develop business continuity strategies that make the most of existing resources and locations, and investigate how to take advantage of a global operations network.

5 – Ensure that business continuity plans assume at least a 25% reduction in available workforce, and liaise with local public bodies to identify appropriate response plans if a pandemic is announced.

6 – Deploy exercises and simulations of components within the business continuity plan to ensure such plans will actually be effective.

7 - Think the unthinkable. While operating in the hope there will be no cause to implement a business continuity plans, organizations need to make sure that should the worst happen, disruption is as brief and isolated as possible.

Source: Vicki Garfinkel, Andover Communications, 201-947-4133

Wednesday, April 05, 2006

More on the Terra Nova / Rush Merger

Yesterday, I had the opportunity to talk with both Chris Doubek, Terra Nova’s president, and Rusty Moore, CEO of Rushtrade, about the upcoming merger. 

Chris Doubek, Terra Nova’s president, says, “At a high level, the plan is to merge the two firms and increase the level of service.‿ According to Doubek, the rationale for the merger is to combine RushTrade’s proprietary trading software with Terra Nova’s back-end processing and clearing operation to create an entity that owns its own technology “from soup to nuts.‿

Rush is smaller, but publicly traded.  They were looking for a way to go self-clearing while Terra Nova had been quietly on the market for several months.  Doubek says, “The way this worked out, we looked at the opportunities of merging the two entities that creates one firm that has our back-end and their front-end.”

Terra Nova has been self-clearing for two years, while RushTrade has cleared through Penson Financial Services.  Doubek says the combined firm plans to implement self-clearing for RushTrade’s customer base in the very near future. 

Terra Nova at present licenses Townsend Analytic’s RealTick software, which Doubek admits is “a little much‿ for the average retail investor.  Doubke says that RushTrade’s trading platform offers about 70% of RealTicks’ functionality, but will be much less expensive to offer.  They will continue to offer RealTick to their high-end customers, but will encourage their “average” retail traders to use the RushTrade platform, which will result in lower costs for those customers. 

Rusty Moore, Jr., Chairman and Chief Executive Officer of Rush is enthusiastic about Terra Nova’s back office proprietary solution, which he says, “gives us a low cost solution in the marketplace since we’re not licensing the technology from someone else like some other self-clearing firms are.‿

Doubek indicated that the combined firm plans to offer “very competitive‿ commissions, but will stay out of the low end currently occupied by Interactive Brokers and MB Trading.