Financial Markets and the Internet

Author: Tuomas Pättiniemi
Helsinki University of Technology

In the present day, many institutions acting in the financial markets have at leat a home page in the Internet. Some of the institutions offer a variety of services via the Internet, and this trend is likely to continue with an accelerating pace.

The financial institutions have been among the first to use IT technology extensively. This has simply to do with the intense competition in the financial markets: to stay ahead, one has to use all the means possible, including fast adoptation of IT technology.

This essay provides a quick look at how some financial institutions present themselves in the Internet. The outlook of an institutions web pages reflects its technological skills, and the willingness to provide (possibly free) services for the public, both of which are good signals of the institution's potential as a service provider. Therefore, the approach taken here should be well justified.

The quick overview given here includes sample institutions from the following categories:

It should be noted that the selection of organisations has been made from a point of view of Nordic countries.

1. Scandinavian banks

Merita Nordbanken[1]

Finland has been one of the leaders in automatic teller machine usage and speed of money transfers. A Finnish specialty has been combining credit cards with bank cards which allow quick payments within the country.

Merita is a Finnish bank active in the development of new electronic commerce products. The homepage of the bank can be viewed in Finnish, Swedish or English. One interesting Internet-based banking service provided by Merita is the Solo bank. Solo allows customers to:
- do balance and transaction inquiries
- carry out payments of bills
- execute account-to-account transfers to any bank
- get information about the Finnish securities market and give purchase/sell orders.

In my opinion, esp. the last of these services can be very valuable. It may well be a subject to arguments whether personal service over phone, for example, is in practise better than online services over the Internet when making transactions in the stock market, but certainly the trend in not-so-urgent banking services, like paying bills, is towards Internet, and Merita Nordbanken is one of the leaders to show the way.

Postipankki[2]

Together with Merita and another Finnish bank, the Okobank Group, Postipankki has launched cards that can be loaded in ATM machines. Then the ATM/bank card can be used to pay for amounts lesser than FIM 30 (USD 6) which is the lower limit for bank card transactions. These cards are presented in the web pages of Postipankki, as are many other services by the bank. One can, for instance, make a monthly payback calculation for a mortgage, or you can get an estimate for what your home if worth. All in all, the pages please the eye, and, offer a wide variety of information and nice, little services. Definitely not bad.

2. Investment banks

J.P. Morgan[3]

JPMorgan has developed a methodology of measuring market risk for a multi-currency investment portfolio. The methodology is called RiskMetrics. It uses the value at risk (VaR) concept. In VaR, user gives a probability, and the system then calculates how much could be lost at the given probability level (a worst-case scenario). For instance, the system could answer that USD 5 million could be lost at 1 per cent probability. The portfolio must be specified and the historical data must be fetched (JPMorgan offers a historical database for free). A simple VaR calculator can be found at: http://www.jpmorgan.com/RiskManagement/VaR/VaRcalc.html.

A new application launch by JPMorgan handles credit risk. The product is called CreditMetrics. JPMorgan offers for free the description of the methodology and a database, but the application software must purchased. (Maybe smart users could build their own applications.) Information on RiskMetrics can be found on http://www.jpmorgan.com/RiskManagement/RiskMetrics/RiskMetrics.html.

Merrill Lynch[4]

This investment bank has a very friendly face in the Internet. Perhaps surprisingly, an individual citizen, instead of a large corporation, seems to get a lot of attention. The home page has links, for instance, to Personal Finance Center (http://www.ml.com/personal) and Investor Learning Center (http://www.ml.com/investor). Even kids are taken into account (http://www.ml.com/family).

3. Exchanges and clearing houses

Helsinki Stock Exchange[5]

The Helsinki Stock Exchange offers via the Internet the bread and butter of private investor's financial information: market prices for equities in the exchange (http://www.hse.fi/market_prices.html). However, the prices are given for the last closing of the exchange. No real-time price information is offered.

SOM (The Finnish Securities and Derivatives Exchange and Clearing House)[6]

The tip of the iceberg in terms of financial sophistication of its operations, SOM offers the user a tool for analyzing real-time derivatives price information. The tool is called Somtel, and SOM charges the user's ecash account from Eunet Finland. The rates of service are very reasonable, it seems, even for a private citizen (another story is, whether the volatile derivatives should be touched by anyone other than banks and corporations).

4. Central banks

Bank of Finland[7]

The Bank of Finland's pages offer news, statistics, and a abstracts of publications by BoF. The news section is pretty straightforward, including notifications and commentories by the bank itself. The statistics pages are quite good, including many central economic indicators. One minus is that not all the pages are updated frequently enough. For instance, the graph of asset prices in Finland was about two weeks old - which in asset markets is often a life time, as the last two week of October have again shown.

The publications sector offets invaluable information for the practising economist, who is looking for references about a certain subject. Full abstracts are included of the well respected economic series papers by the BoF.

All in all, the outlook of the BoF in the Internet remains official and a bit sterile, which is well in line with the character of the institution itself. Still, a good starting point.

Bank of England[8]

The Bank of England gives a very down-to-earth impression about itself in the Internet. It does not show any royal arrogance, but rather manages to underline its prestige and dignity.

Like its Finnish counterpart, the Bank of England offers publications and press releases, but it does not have links to statistical data in its pages. The links to published material is nicely categorized by subject, and by format. The published material contains full reviews and analyses, and not just abstracts, and one can find some fairly interesting topics. In addition, some interesting pointers have been included in the pages, like a series of articles concerning printed money.

5. Finance ministries

The Finnish Ministry of Finance[9]

In the Finnish Ministry of Finance's pages one can look at the latest press releases by the MoF, skim through the latest reviews of the Finnish economy, and find data about the budget process. But even more than in the Bank of Finland's pages, the feeling remains very civil-servant-like: no human touch (no offense!). The more interesting sector seems to be the part that handles the ministry itself, its tasks, organizational structure and history. Only parts of the tour are provided in English.

The Swedish Ministry of Finance[10]

The Swedish Ministry of Finance does not even reach the level of the Finnish MoF, Internetwise, that is. The press releases are there as are the definitions of the ministry is supposed to do, and not really that much of anything else. For some reason, the promised "In English" section did not open at all! Probably the most rewarding thing was to look at what the Minister of Finance Åsbrink had written about himself at the "Personligt" section.

6. Market information providers

Reuters[11]

Market quotes here, for hundreds and hundreds of stocks (although the free quotes are delayed at least 20 min, meaning that for making orders in highly volatile markets, one still has to rely on more current quotes)! By paying one can get real-time quotes for stocks and options, which is more like the thing. The Reuters pages (the MoneyNet section) are a real treasure chest for a private investor who does not have a professional market data information system available. In addition to market quotes, one can order annual reports for free, and many other things, including a financial link page (http://www.moneynet.com/home/MONEYNET/pages/NavFrame.asp). As a minus, Reuters pages are a bit confusing in the sense that it is sometimes a bit difficult to find your way around.

One interesting detail about Reuters: although widely known as a news agency, only six percent of the British giant's turnover comes from the traditional news production - the rest comes from financial and economic data production!

Telerate[12]

Very much like Reuters pages, but maybe even better. Everything is there: the quotes including foreign exchange and mutual funds. And, it is all very nicely laid out. One could spend days in here...

7. Firms providing dealing, risk management, and back office systems

In the past few years, the demand for frong office, middle office and back office systems by banks and other financial institutions has risen dramatically given rise to a good number of successful software companies filling these needs. Part of the demand has come from the fact that public authorities have started to regulate the banking industry more strictly as a consequence of the unfortunate cases of the Barings Bank and the likes.

Infinity[13]

As one of the truly brilliant new companies experiencing phenomenal growth in the past couple of years, the company announced merging with the rival Sungard in October 1997. About the web pages, one of the most interesting aspects is the link to "Riskview," which is a free site by Infinity, Dow Jones and IBM, where investors ".. can track historical equity performance and conduct risk/return analyses." Judging by a quick look, this service might turn out to be one of the most valuable services in the Internet yet. These kind of tools have traditionally cost good money to subscribers, and here is one for free. The Riskview tool should not be taken lightly, as Mr. Guldimann, one of leaders in the risk management business, is one of the Infinity managers behind the project.

The "normal" services include product overviews, press releases and such. One of the best things, the technical query database, is for clients only, and is passwords protected. Way to go, (to) Infinity!

Sungard[14]

As opposed to Infinity's pages, nothing special to be found there. Company information just tells what Sungard consists of, and the usual press releases are to be found as expected. Although visually quite pleasing, these pages don't offer much.

Trema[15]

The Swedish-Finnish, fairly unknown, although a very serious software company offers little over the bare minimum in its web pages. Though better than Sungard's, nothing wonderful can be found here. Some of the topics covered are quite interesting, however, including Trema's business strategy. As a blunder, the Finance onLine's latest issue was 1/96 while the customer magazine Finance Line has had many issues since.

8. Concluding remarks

All the actors in the financial markets are rapidly extending their services offered via the Internet. The electronic age is changing the way economic and financial information is disseminated throughout the world. The trend is clear: institutions are entering the Internet with more advanced services all the time, and information access is becoming easier than ever before.

9. References

(The links are graded from * to ***** in respect to how interesting the pages seem and to what level of service can be found under the links.)

[1] Merita Nordbanken
<http://www.merita.fi>
*****

[2] Postipankki
<http://www.psp.fi>
***

[3] J.P. Morgan
<http://www.jpmorgan.com>
*****

[4] Merrill Lynch
<http://www.ml.com>
***

[5] Helsinki Stock Exchange
<http://www.hse.fi>
****

[6] SOM
<http://www.som.fi>
****

[7] Bank of Finland
<http://www.bof.fi>
***

[8] Bank of England
< http://www.bankofengland.co.uk>
**

[9] The Finnish Ministry of Finance
< http://www.vn.fi/vm/index.html>
*

[10] The Swedish Ministry of Finance
<http://www.sb.gov.se/info_rosenbad/departement/finans/finans.html>
*

[11] Reuters
<http://www.reuters.com>
****

[12] Telerate
<http://www.djmarkets.com>
*****

[13] Infinity
<http://www.infinity.com>
*****

[14]Sungard
< http://www.sungard.com/trust/hometru.htm>
**

[15]Trema
<http://www.trema.se>
**


Here are some other links:

Investment banks:

Credit Suisse/First Boston
<http://www.csfb.com>
**

Goldman Sachs
<http://www.goldman.com>
**

Morgan Stanley
<http://www.ms.com>
***

Salomon Brothers
<http://www.salomon.com>
**


Exchanges and clearing houses:

Optionsmeklare
<http://www.omgroup.com>
****

New York Stock Exchange
<http://www.nyse.com>
***

Japan
< http://www.iijnet.or.jp/nse-jp/e-home.htm>
**


Central banks:

Germany
<http://www.bundesbank.de>
*

United States of America
< http://www.ny.frb.org/links.html>
**


Finance ministries:

France
< http://www.tresor.finances.fr/oat/us/sommaireus.html>
**

Great Britain
< http://www.hm-treasury.gov.uk/>
***

USA
<http://www.ustreas.gov/>
****

Japan
< http://jw.nttam.com:80/search/GOV/CABINET/MOF/MOF.home.html>
*


Firms providing dealing, risk management, and back office systems:

Algorithmics
< http://www.algorithmics.com>
***

Summit
<http://www.summit.com>
**


Various categories:

Bank for International Settlements
<http://www.bis.org/home.htm>
***

OECD
<http://www.oecd.org>
**

The World Bank Group
<http://www.worldbank.org>
**

Elinkeinoelämän tutkimuslaitos
<http://www.etla.fi>
**

Elinkeinoelämän valtuuskunta
<http://www.eva.fi>
*

Valtion taloudellinen tutkimuskeskus
<http://www.vatt.fi>
*

Economics related resources
< http://sticerd.lse.ac.uk/depts.htm>
***

WebEc
< http://www.helsinki.fi/webec/index.html>
***

Resources for Economists on the Internet
< http://wueconb.wustl.edu/EconFAQ/node1.html>
***

N.B. In the list above, the following categories have not been looked at:


Tuomas K. Pättiniemi <tkp@cc.hut.fi>

Last updated November 13, 1997. >