Banking Explained

Technology continues to march forward on Wall Street. It seems as if the markets are now dominated more by machines than by humans. According to some industry pundits, algorithmic trading and high frequency trading now accounts for anywhere between 50% and 80% of all US equity volumes.

This has brought about a whole new set of risks. The potential danger of one of these systems running out of control, going haywire and bombarding the markets with millions of orders per second, is very real and could have disastrous consequences for the world’s financial systems.

There are many types of algorithmic trading systems and strategies used by proprietary trading firms. Some systems “scrub” news stories to look for news and events that might move a particular stock. Other systems are “non-directional”, looking for price discrepancies and capitalising on their speed of execution to arbitrage those opportunities.

What is getting some people worried is the speed at which these systems can generate and execute orders, and the volume of throughput they can handle. Orders can now be generated, sent to an exchange, executed and reported back in less than a millisecond (a thousandth of a second). And multi-processing, high-throughput parallel processing technology allows for millions of such orders to flow through the exchanges systems.

But just because the technology allows high frequency trading to take place, doesn’t mean that all the controls are necessarily in place to prevent errors occurring. With increased speed and increased throughput comes increased risk. It is this risk that the regulators are now trying to get their heads around.

What happens if one of the machines does go haywire? And is the integrity of the markets threatened by the fact that only the biggest players have the fastest technology? Are those big players “fleecing” smaller investors?

The regulators have a tough job ahead. Only time will tell whether they are able to introduce controls that benefit all.

When it comes time to move your funds from your existing retirement account, the transfer can be rather overwhelming. The best way to overcome your fear of the transaction is by educating yourself to the various options you have available to do the transfer. There are a number of ways to facilitate your 401k rollover. It is usually just a matter of matching your needs with the appropriate vessel.

The 401k rollover option that many people do not realize is not available to them is the 401k rollover to Roth Individual Retirement Arrangement. This method of transferring your funds now allows you to transfer directly into a Roth IRA. Up until the last couple of years, this was previously impossible. If you wanted your funds to end up in a Roth, it generally required a number of tedious and complicated transfers between different retirement accounts.

Similar to a Roth rollover is the rollover to a Traditional IRA account. This option allows you transfer your funds directly into a traditional IRA account. This rollover is fairly straightforward as the two retirement account types behave quite similarly. IRA accounts tend to offer a wider range of flexibility upon retirement however.

Another option for your retirement funds it to transfer them into another 401k account. This allows you to continue in a vessel that you are familiar with. The transfer is usually just a matter of coordinating between the two account managers and making the change. For those that are simply changing jobs, this may be a good option for your transfer.

Another option for you funds is to simply withdraw the money from the account. If you are not of sufficient retirement age, this may have adverse tax consequences however. You will want to be aware of any tax responsibility or early withdrawal penalties that may be associated with the transfer out of the account.

Surely, you have been wondering what it would be like to simply sit at home, sipping drinks by the pool and just living off dividend checks that arrive regularly through the mail. However, before you can achieve that kind of financial independence, you must first understand what dividends really are, and how do companies pay dividends.  You should also understand what the different types of dividends that are available such as cash dividends, property dividends, stock dividends, and liquidating dividends, just to name a few of the different types.

A company that earns a hefty profit can do one of three things for its investor’s.  They can pay the profit out to its shareholders, reinvest it in their business by expanding it, or reduce their debt.  They can also reduce the amount of outstanding shares by buying back shares on the open market.  When a portion of the profit is paid out to its shareholders, the payment will be known as a dividend. However, for many investors, the receiving of dividends is an important goal.

Nevertheless, before you can achieve such as a goal, you need to know the basics of dividends and these are:

The Process – Dividends must be declared first by the company’s Board of Directors. There are three important dates to remember regarding dividends.

Declaration Date – The declaration date is the date set by the Board of Director’s and announces their intention to pay a dividend to their investors.

Date of Record – This date is more known as the “ex-dividend” date. It is the date upon which the stockholders of the record are entitled to the upcoming dividend payment.

Payment date – This is the date that all shareholders are waiting for, the dividend will be then given to the shareholders of the company.

Some companies have a long history of paying dividends.  You can do the research and find the companies that historically have paid 3% in dividends.  This can be an important source of income.  In today’s economy and how interest rates are, obtaining a 3% return in addition to the potential growth of a companies stock is an important consideration of whether or not you should buy shares in that companies stock.