FACULTY OF COMMERCE

BACHELOR OF COMMERCE DEGREE IN BANKING AND FINANCE

FINANCIAL SYSTEMS INFORMATION (BBF 4102)

STUDENT NAME: MASEGO GAAINEWE

STUDENT ID #: 01171723312

LECTURER: NYONI

SUBMISSION DATE: 24 SEPTEMBER 2020

QUESTION 1

Information Technology has been the most potent solution in the global vicinity of the trade
industry that fosters innovation in most business for its timeous improved data caption, fast
processing and wider information distribution. These has allowed both the primary and
secondary markets to run more efficiently, increase in value, enhance quality and boosts
productivity.

The Primary market is where securities are created and the Secondary market is where those
securities are traded by investors. Knowing how these two markets works is of paramount
importance to understand how stocks, bonds, and other securities trade. So understanding how
these two market works, will allow parties involved to openly assimilate various digital methods
and techniques to close sale on their commodities. The major importance of Information
technology over these two market is that it allows for a holistic and systematic approach to
different attributes that are concerned under the securities that investors may find as an
opportunity to buy from the bank that they did the initial underwriting for on a particular stock.
Users are able to easily share documents of all types without incurring print costs, capture all
digital and paper based content and store them in a centralized system which makes it easy for
investors to be able to locate and weigh exactly where to place their capital in order to purchase
stock for a particular company. It has also brought a typical multi party agreement platforms that
reduces time spent on contractual means. Innovation now is a streamlined solution for the
primary market as information technology has perfectly fit in these market environment to render
convenience in navigating through created securities. The secondary market on the other had is
commonly known as the stock market and here investors trade among themselves. That is,
investors’ trade created securities without the issuing companies’ involvement. Therefore
Information Technology has granted the investors with readily reliable and cost efficient
platforms to buy stock from each other for example buying stock from Amazon stock one
investor is simply dealing with another investor who owns shares in Amazon. That is Amazon is
directly involved with the transaction.

The Information Technology solution in a nutshell has provided myriad ways of controlling both
direct and indirect cost affiliated with the daily dynamic business investments within these two
markets.
QUESTION 2

Electronic commerce is the marketing, buying and selling of merchandise or services over the
internet which encompasses the entire scope of online products and service sales from start to
finish. E commerce facilitates growth of online businesses through online marketing, advertising,
sales, delivery, and payments just to mention a few. Therefore the new business environment
associated with electronic commerce has proven that it holds the potential to transform the
banking and financial system which can help to lay a sound foundation that will provide business
opportunity for banks to sell their products and services to their end users as well as for the
international financial system. Banks and financial firms can use the technology and business
practice of electronic commerce to market their products to the customers. An important aspect
of the electronic commerce is the potential for market participants to automate transaction
processing fully, from the point of trade to final settlement. This verily proves that the
automation that is brought about by electronic commerce has the potential benefits for the
stability of financial system as a whole which enables banks to use automated electronic
networks to select, execute and process various transactions. Some of which entails the payment
system of other institutions that bank with a particular financial firm to settle remuneration at a
specified time period without delay. This therefore eliminates paper work and error that are
usually affiliated with human error or data manipulation hence reducing loops that may be
visible within the financial system to eliminate fraud.

Timeous caption of all the financial transaction that are stored in a logical alphabetical order or
date within the system makes it easy to track and retrieve amass information that can be required
at any given point in time. Electronic commerce has radically improved the financial system to a
steadier, reliable, cost efficient banking tool to monitor and control all the credit and debit of
each financial action.
QUESTION 3

A. Financial information exchange protocol is an open electronic communications protocol

which is set to standardize and streamline electronic communications in the financial
services industry supporting multiple formats and types of communications between
financial entities including trade allocation, order flow, quotes, security and position
reporting, program trading and more. The automation of trade and post trade processes
has changed the way firms operate and interact, therefore this automated communication
between various participants offers benefits that are particularly strong when internal
automation and external communication are conducted with the same messaging protocol
such as FIX. The benefits include the following:

 Connectivity costs, it reduces the connectivity costs during adoption, use and
maintenance of application software when establishing links between market
participants.
 Efficiency levels, the adoption of FIX in integrating internal processes and
external operations, efficiency is increased internally by reducing costs and
operating risks.
 Increased ease and speed of disseminating new products
 Improves reporting capacity of firms to generate more comprehensive reports
covering all their trade activity with various counterparties across different market
divisions.
 Increased actual and potential competition between firms. The greater the ability
of investment managers to switch between, and to connect to, brokers is expected
to strengthen competition among brokers for the provision of trading services.
Factors such as investments managers being able to achieve cost-effective access
to wide range of market segments are likely to increase competition among
investments.
 Improved liquidity and reduced implicit trading costs (for example effective bid-
ask spreads, trading platform fees). The increased level of trading activity arising
 from the lower brokerage commissions and exchange fees and greater choice of
executive services.

B. i) Standards and protocols for financial messaging - A highly scalable electronic

communication protocol to facilitate real time exchange of information related to financial
market. It is used by all market participants meaning bit connects all of them. This is straight
through and gives aces to real time market data. Benefits of standard messaging protocols
include, new trading possibilities, indirect network effects, and economies of scale. Materialize
through changes in how investment managers, brokers and trading platforms operate and
interact.

ii) Black box - It is testing which involves testing a system with no prior knowledge of its
internal workings, in simple terms a tester provides input and observes the output generated by
the system. This generally requires no or less knowledge on IT and has low chances of false
positive. An example of a security technology that performs black box testing is Dynamic
Application Security Testing (DAST), which tests products in staging or production and provides
feedback on compliance and security issues.

Iii) Algorithmic trading- It is a trading which uses a computer program that follows a defined
set of instructions (an algorithm) to place a trade. The trade is said to be faster and more accurate
than human as it follows set of information on timing, price, quantity and any mathematical
trades. Benefits includes; Trades are executed at the best possible prices, reduced transaction
costs. Algo-trading can be backtested using available historical and real-time data to see if it is a
viable trading strategy.
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Abiteboul, S., R. Hull and V. Vianu. 1995. Foundations of Databases. Addison-Wesely

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Adams, C. R. 1975. How management users view information systems. Decision Sciences 6(2):
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