Private banking in a sweet spot

Business Times - 08 Jul 2009

Singapore is now in a unique position to strengthen and grow its private banking industry

By KAREN BOWMAN

SEISMIC shifts in the global economy have changed the face of financial institutions across the world, and private banking is no exception. Traditional private banking strongholds, such as Switzerland, are increasingly facing competition from other jurisdictions. Now may prove to be a good time for Singapore to solidify its presence on the private banking world stage.

Singapore has shown impressive growth in the private banking industry over the past decade, ballooning from 20 private banks in 2000 to 42 in 2009. Private banking assets have also grown accordingly, from $50 billion in 2000 to $300 billion today. Singapore is now the second largest private banking centre internationally, holding 6 per cent of global private banking assets, behind Switzerland, which holds an 18 per cent share, according to a 2008 report, Singapore: The New Switzerland, by Barrons. However, Euromoney indicated that same year that, while Switzerland can only strive for single digit growth in the industry during 2009, Singapore is projected to grow its private banking sector by 26 per cent.

Singapore (as well as Switzerland), is currently included in the Organisation for Economic Cooperation and Development's (OECD) 'grey list' as a jurisdiction that has committed to the OECD's exchange of tax information standard but has not yet substantially implemented the standard.

Government officials recognise that graduating to the OECD's 'white list' and being labelled a jurisdiction that has substantially implemented the OECD's standard will be critical to enhancing Singapore's position as a major international private banking centre.

In a speech to Parliament on 29 May, 2009, Second Finance Minister Lim Hwee Hua stated that the government is working to move Singapore to the OECD white list. She went on to emphasise that this is 'in line with Singapore's status and reputation as a trusted and responsible financial hub', as 'Singapore does not and will not stand for the abuse of its laws to shelter financial criminals'.

Proposed changes

On 30 June, 2009, the government released proposed amendments to the Income Tax Act that will allow Singapore to enter into Avoidance of Double Taxation Agreements (DTAs) with other countries. This supports the internationally agreed standards on the exchange of information (EOI) for tax purposes.

The proposed changes will help with the level of assistance that Singapore can provide to foreign jurisdictions under DTA's.

Sum Yee Loong, a tax partner at Deloitte Singapore, feels that if these amendments are enacted, Singapore will soon find itself on the white list.

This commitment to ensure Singapore retains its reputation as a trusted financial hub will be critical to private banking's long-term success in the country.

The recent moves by the G20 and the OECD to tackle, through the exchange of tax information between countries, the perceived use of so-called offshore tax haven jurisdictions for tax evasion purposes, should lead to a more level playing field globally. Singapore can only benefit from this, with a well-regulated and efficient business environment and a strong rule of law, as well as a competitive but transparent tax regime.

Singapore's many advantages should help counter a growing lack of investor trust for private banking. A recent Deloitte survey found that 69 per cent of Swiss private bank clients do not trust their wealth manager. Strategically, Singapore's reputation for transparency and stability may be paired with low pricing as an incentive to move accounts from markets such as Switzerland to Singapore.

Though Singapore has set a solid foundation for its private banking sector, there are challenges that will have to be overcome to ensure success. Building a dominant brand takes time, commitment, and significant investment. Migrating clients will require an extremely high standard of customer service with assurance of in-depth expertise.

Time differences make attention to communication particularly important, and a variety of methods need to be analysed to determine how best to achieve seamless interaction with clients.

At a recent executive briefing focused on private banking, Deloitte's Asia-Pacific Head for the Global Financial Services Industry, Dr Philip Goeth, noted that there are several critical success factors that will help lead to Singapore's growth in private banking. These include brand development, trust building, high quality client service, a proven track record in wealth management, and seamless, scalable operations.

Volatile markets render even more important the need for a clear framework and process in managing risk for private banking.

Sound, cutting-edge processes for identification, valuation, control and monitoring of risks help organisations anticipate risks in uncertain markets and lead directly to improved financial performance. Risk models need to be implemented and tested on a regular basis to ensure that they work as intended.

Staying vigilant

Banks must remain vigilant and up-to-date on exposures regarding international sanctions. In addition to protecting reputation, a strategic approach to meet regulatory conditions in the current economic environment can create a competitive advantage with higher returns for the medium term. Perhaps the most significant strategic differentiator, in particular for Asian clients, that Singapore must strive for, is operational excellence.

A bank should work to understand clients' perceptions of its potential and brand. Clients need to be assured of expert investment advice, bank reputation, and comprehensive systems to protect assets. Best-in-class data privacy and protection is essential in allaying fears and growing the market.

Deloitte South-east Asia's Privacy and Security Head, Joshua Chua, emphasises that data leakage protection and detection needs to be embedded upfront into systems. Singapore has already taken steps in this direction, with many banks moving data centres handling private banking transactions from India back to Singapore.

This is a strategy that can be capitalised on in advertising Singapore's strength in the industry,as banks in other regions have moved their back office functions to India.

Though the new financial landscape continues to shift, some of its features are becoming clear. Private banking clients are increasingly concerned about risk exposure and reducing risk, which will lead to increased demand for simplified, transparent financial products. Investors seek institutions with strong capital positions.

This puts pressure on banks to ensure the utmost operational efficiency. Assurance and protection are the new catch phrases. New market drivers, such as customer excellence, come to the fore. With its strong business reputation, government support, and strategic location, Singapore stands in a unique position to strengthen and grow its private banking industry.

The author is an Executive Director, Global Financial Services Industry, at Deloitte Singapore. She was assisted in research for this article by Molly Padgett, a Manager at Deloitte Singapore.

Asian commodity traders vexed by liquidity gap

Business Times - 08 Jul 2009

Dearth of activity during Asian trading hours can lead to erratic swings in prices

(SINGAPORE) The rogue Brent trades that roiled the oil market in the normally placid wee hours last Tuesday have again put a spotlight on the lengthy period of Asian illiquidity for the world's main commodity markets.

The sharp jump in prices and volumes on Brent - and gold's drop two months ago - ultimately had no lasting impact on world prices, but vexed Asian traders who face a constant dilemma: Keep large stop orders out of the market during thin Asian trade to avoid moving prices accidentally, or leave them open in the hope of a burst of liquidity like last week's.

There are several ways to lift liquidity, none of them quick: Find a few brave souls ready to break their routine and make an early market, develop an Asian exchange with compelling local contracts, or wait for China and India to unshackle thriving domestic exchanges to allow outbound trade.

'I think it will be a combination of a few factors; the centre of commodities trade is shifting east more and more, so there will be more demand for liquidity, and I guess there will be some incentives from the exchanges for market makers,' said Roberto Tassinari, a proprietary trader with Saxon Financials.

As global exchanges like the New York Mercantile Exchange and the London Metal Exchange adopted near-24-hour electronic trade over the past decade, they also tried to foster greater activity in the Asian time zone, both to establish their market position and to grow business in the fast-expanding region.

They have largely failed, resulting in global benchmarks for soybeans, oil or copper that are open for trade but nearly dormant for one-third of the day.

'It will take at least five to seven years to have adequate liquidity,' said a Singapore-based industry source who trades global commodities. The best hope, he said, is 'China opening up and moving from a price taker to benchmark setter'.

For now the market may have to live with the risk of the occasional jolt like the one that occurred around 9am Singapore time last Tuesday, when a series of roughly 500-lot bids by a rogue London-based Brent broker at PVM triggered a more than US$2 surge in prices .

The reaction would have been far more muted if the same volumes had gone through during the highly liquid US and European trading periods.

In a single hour more than 11,000 lots of Brent traded, over 10 times the norm for the entirety of the Asia time zone, but about average activity for the main 1000 to 2000 GMT period.

The incident - which PVM says cost it nearly US$10 million and is under investigation - comes just two months after an apparently mistaken sell order for Comex gold futures triggered a sudden US$10 fall in midday Asian trade, a sizeable move that dragged down spot bullion and roiled the market.

While the latest incident is sure to cause a new round of questions about broker trading controls, the more immediate issue for the growing ranks of Asia-based commodity traders is how to protect themselves from erratic, low-liquidity moves.

Some find hope in the growth of local contracts, from the birth of the Dubai Mercantile Exchange's Oman crude oil futures contract two years ago to the ASX's launch of an Australian thermal coal futures contract last week.

Several other exchanges in Singapore are also in the works, some trying to capitalise on strong Indian demand for more venues that sidestep currency controls as well as regulatory risks in a country where the government has been quick to shut down any contract it fears is stoking local prices.

In China, Shanghai copper and Dalian grains contracts have become important global weathervanes for those markets.

When adjusted to compare like for like per-tonne trading volumes, total volume in the Shanghai Futures Exchange copper contract is roughly equivalent to total LME trade, according to Reuters data.

The liquidity gap is acute.

Front-month Nymex crude oil futures traded an average of under 8,000 lots a day from 0000 to 0800 GMT in June; from 1200 to 2000 GMT they traded over 200,000 lots. The two front CBOT soybean contracts Sc2 trade some eight times more in just five hours of Chicago trade than in 12 Asian hours.

Exchanges are unlikely to consider curbing hours to reduce the market's liquidity exposure, although ICE Futures rowed back extended hours over the past two years after concerns about market liquidity and complaints from London brokers who were reluctant to staff desks at all hours.

Ultimately what's needed in the short term is a few more players like Peter Maguire, the managing director of Commodity Warrants Australia, who faced down sceptical traders over the past five years as he sought to fill orders during his daytime.

'We started trading during the day here and people told us nothing was going to get done. But we just put the bid in and it gets hit. In Delaware or Moscow or wherever, somebody is messing around on their Blackberry and sees a good trade.' - Reuters

Goldman may lose millions from code theft

Business Times - 08 Jul 2009

Program can be used to manipulate markets: prosecutor

(NEW YORK) Goldman Sachs Group Inc may lose its investment in a proprietary trading code and millions of dollars from increased competition if software allegedly stolen by a former employee gets into the wrong hands, a prosecutor said.

Sergey Aleynikov, an ex-Goldman Sachs computer programmer, was arrested July 3 after arriving at Liberty International Airport in Newark, New Jersey, US officials said. Aleynikov, 39, who has dual American and Russian citizenship, is charged in a criminal complaint with stealing the trading software.

At a court appearance on July 4 in Manhattan, Assistant US Attorney Joseph Facciponti told a federal judge that Aleynikov's alleged theft poses a risk to US markets.

Aleynikov transferred the code, which is worth millions of dollars, to a computer server in Germany, and others may have had access to it, Mr Facciponti said, adding that New York-based Goldman Sachs may be harmed if the software is disseminated.

'The bank has raised the possibility that there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways,' Mr Facciponti said, according to a recording of the hearing made public yesterday.

'The copy in Germany is still out there, and we at this time do not know who else has access to it.' The prosecutor added: 'Once it is out there, anybody will be able to use this, and their market share will be adversely affected.'

The proprietary code lets the firm do 'sophisticated, high-speed and high- volume trades on various stock and commodities markets', prosecutors said in court papers. The trades generate 'many millions of dollars' each year.

Defence attorney Sabrina Shroff said in court that the government's allegations are 'preposterous'. The firm was aware that Aleynikov, who is the father of three young girls, was downloading programs to his personal computer to do work at home and that he has not disseminated the code, the lawyer said.

'If Goldman Sachs cannot possibly protect this kind of proprietary information that the government wants you to think is worth the entire United States market, one has to question how they plan to accommodate every other breach,' she said.

Michael DuVally, a spokesman for Goldman Sachs in New York, declined to comment.

US Magistrate Judge Mark Fox ordered Aleynikov, who earned US$400,000 a year, to be held on US$750,000 bail, after prosecutors claimed that he posed a threat to the community. Aleynikov planned to earn three times his salary by joining a start-up company and engaging in high-volume automated trading, prosecutors said. He posted bail on Monday and was released.

He did not speak at the hearing, except to say that he understood the conditions of his bail.

'Someone stealing that code is basically stealing the way that Goldman Sachs makes money in the equity marketplace,' said Larry Tabb, founder of Tabb Group, a financial market research and advisory firm.

'The more sophisticated market makers - and Goldman is one of them - spend significant amounts of money developing software that's extremely fast and can analyse different execution strategies so they can be the first one to make a decision.' Someone could use the code 'to implement the same strategies and maybe on certain stocks they can be faster and, in effect, take away money that would normally be Goldman's', Mr Tabb said in a phone interview.

'The second thing that they can do is actually analyse the code so that they know what Goldman's going to do before Goldman does it and kind of reverse engineer Goldman's strategies and make money basically at the expense of Goldman.'

Aleynikov spent four hours with a Federal Bureau of Investigation agent after his July 3 arrest, Ms Shroff said. He told the agent that he had done nothing wrong, authorised prosecutors to seize his personal computers, and said that he did not know that the server he was using was in Germany, she said. -- Bloomberg

The cane whistles, but does it really hurt?

Business Times - 08 Jul 2009

COMMENTARY

MAS bans won't affect FIs much and it shouldn't gloss over deeper issues

By WONG WEI KONG

IT is a pity that what seems so tough is really just a slap on the wrist.

So the Monetary Authority of Singapore (MAS) has banned 10 financial institutions (FIs) from selling structured notes for periods ranging between six months and two years for mis-selling products linked to collapsed US bank Lehman Brothers.

The offending banks on the list are all established names: ABN-Amro, DBS Bank, Maybank, DMG and Partners Securities, UOB Kay Hian, CIMB, Kim Eng Securities, OCBC Securities, Phillip Securities as well as Hong Leong Finance. These were names that many investors instinctively trusted - but, as the MAS findings show, it was a trust that was grossly misplaced.

On the surface, the MAS ban, following approximately seven months of investigations, appears to be appropriate punishment. But it really rings hollow, because it isn't going to hurt the FIs very much. The fact is that the whole structured products market has vanished - the financial crisis and the structured notes fiasco have seen to that. Even without the ban, these FIs weren't selling any structured notes.

This will be cold comfort to the 10,000 or so investors who suffered from the mis-selling, some of whom will never fully recover from the blow. And it isn't satisfactory, given the serious lapses at the FIs. The list of shortcomings makes for shocking reading: risk profile questionnaires that were wrongly scored; risk profile scoring systems that did not allocate numerical scores; wrong classifications of products, and relationship managers (RMs) and representatives who refused to attend the pre-requisite training. And all the FIs get, so far at least, is a ban on doing a business that doesn't exist anymore.

If a ban really means nothing, the MAS should have imposed fines, big fines, that will hurt the FIs. If it does not want to collect fines, it should have considered pushing the FIs to compensate, more than what they have done, the investors who are seeking redress. Of course, the FIs will say they're suffering reputational damage, but that's already a fact, and that is well deserved.

Oversight and processes

There's another point worth making. Apart from investigations into FI-wide issues, the MAS is concurrently looking into specific cases 'where individuals involved in the sale and marketing of the notes may have departed from the relevant regulatory standards'. Inquiries are ongoing and any regulatory action taken against individuals will be published in due course, the central bank said.

While it remains to be seen what the MAS will do in this respect, it will be a pity if any subsequent action taken is only against the RMs and representatives actually selling the products on the ground. The nature of the lapses identified by the MAS suggests a failure in oversight and processes, which really points the finger at senior executives, and they shouldn't escape responsibility.

And what about the MAS' own role? Dare we suggest that if the sub-prime fiasco hadn't happened and Lehman hadn't collapsed, the mis-selling would have continued merrily and no one would be the wiser? How closely did the central bank supervise the banks when it came to the sale of structured products before the crisis? Liberalising the market is good, but if not implemented properly, the costs, as proven now, are enormous. The MAS itself should be deriving lessons from the whole affair.

Time to win back trust

The industry will respond to this as it usually does. Indeed, the Association of Banks in Singapore (ABS) immediately announced that its member banks are putting in place a series of measures to further protect the interests of consumers who buy investment products, with the measures covering a range of governance and assurance processes, training and compensation of sales personnel, consumer education and enhancements to the sales process. Investors will take all this with a pinch of salt. Weren't there such protestations before?

Forget expansion - winning back trust should be the biggest priority for banks and financial institutions.

What drives the Chinese consumer

Business Times - 07 Jul 2009

By WU ZHIJIAN

NAPOLEON Bonaparte is supposed to have once said: China is a sleeping lion; let her sleep; for when she wakes, she will shake the world. Certainly at the moment, China is rocking the world of commodities. As at late 2008, China contributed to 10 per cent of world's oil consumption, 35 per cent of world's coal consumption, 16 per cent of world's aluminium consumption, 20 per cent of world's copper consumption, 40 per cent of world's cotton consumption and 18 per cent of world's wheat consumption.

What is more impressive, however, is China's seemingly unlimited appetite for bulk commodities in the current uncertain economic environment.

For example, the fact that 90 capesized vessels - ships too large to transit the Suez Canal - wait outside the Chinese ports to discharge a record amount of iron ore makes the country stand out as a silver lining in a gloomy world economy.

Looking back 200 years, China has never been so important to the the global economy as now. But looking back to an even more distant past, however, China has almost always been an important and powerful civilisation.

So is the lion going to be to be able to hold the fort of global economic recovery? It is a big question. One of the keys to the answer is China's domestic consumption.

In this global downturn, China also suffers from a severe slowdown of export growth. But the central government has been quite aggressive in launching an investment campaign and easing bank lending.

According to economic theory, however, whether such a measure is effective in sustaining the economic growth would depend highly on the performance of consumption sector.

So are the Chinese able and ready to spend more? For such a big country with so many people, it is never easy to find a straightforward answer. Sometimes people outside this country are even more interested in this question than the Chinese themselves. Instead of guessing how Chinese might think or behave, we try to provide an alternative to the above question: from inside out.

There were a lot of interesting findings in our study. For example, the global downturn is not as deeply felt by the Chinese as it is in the West.

And there are huge variations in people's responses to their spending agenda in the next 12 months. However, we also find some overlapping points among the majority of our respondents, especially on the concerns that might stop them from spending.

The chart on the right lists the biggest concerns that prevent people from spending as freely they like. Not surprisingly, housing costs tops the list of concerns. This is particularly understandable as China has very limited living space per capita, especially in the big cities, and most people have a strong desire to own their homes.

Other potential reasons that might curb aggressive spending by the Chinese are: the traditional value of thrift; overall rises in living costs; chances of salary cuts/job retrenchment in a slowing economy; plans for children's schooling; and unexpected medical expenses.

Our study is no way near impeccable. For example, the result of the survey is largely subjective to the sample size and demography, which could be biased based only on the Internet drawing method. In addition, there is a lot more detailed work to be done to quantify the negative impact of people's unwillingness to consume more of the country's economic growth. We have no ambition to tackle the above challenge in this study.

Complicated real world


What we would like to stress, however, are the following points. First, there are quite a few concerns that might prevent the Chinese from spending more. The world should not get too excited about the nation's capability to hold the global economic fort. While the import and growth numbers look good on paper, the real world is much more complicated.

Second, instead of guessing what China's next step might be, based on economic models or 'logic', maybe we should pause and listen to what Chinese people think. Here, we mean the ordinary people on the street. The purpose of our study aims to provide the global audience with an unbiased reflection of what is going on at the grassroots and what the people think or care about.

The writer runs the www.chinatells.com website.

Realities of the US dollar system

Business Times - 07 Jul 2009

THE question of a new global reserve currency will likely be raised again at the Group of Eight industrial countries (G-8) meeting in Italy this week, judging from developments over the last fortnight. China has reportedly asked for debate on the issue when leaders from the G-8 meet leaders of the G-5 emerging economies on the sidelines of the summit. Ahead of the talks, China, India and Russia have all pressed for a rethinking of how the world's currency reserves, currently US dollar-dominated, should be composed.

It has not been just rhetoric - China for instance said recently that it will allow companies to use the yuan to settle cross-border trade and let them keep their entitlement to export tax rebates to reduce the reliance of importers and exporters on the US dollar. The People's Bank of China agreed to provide a total of 650 billion yuan (the equivalent of about US$95 billion) to Argentina, Belarus, Hong Kong, Indonesia, Malaysia and South Korea through so-called currency swaps to expand the yuan's usage. China and Brazil in May began studying a proposal to move away from the US dollar for trade settlement and use the yuan and reais instead.

But for all that, the countries pushing for a diminished role for the US dollar face a delicate balancing act. China and India remain dependent on the currency of the US, the world's largest economy and a US$2.5 trillion export market. The International Monetary Fund said on June 30 that the share of US dollars in global foreign exchange reserves, despite the financial crisis, increased to 65 per cent in the first three months of this year, the highest since 2007. It is this exposure, and worries about the impact of US economic weakness and its ballooning deficit on the US dollar, that are driving emerging countries to diversify their foreign currency reserves and to reduce their dependence on the greenback. Yet, any move to reduce the importance of the US dollar may drive its value down, and erode the value of the huge US dollar-denominated assets of these nations.

This was the point made by Japan, which has expressed caution on calls to diminish the US dollar as the key international currency. Yoichi Suzuki, director-general of the Japanese foreign ministry's economic affairs bureau, pointed out that it would not benefit any country to talk about ideas for a new global key currency which would weaken the US dollar.

There are also market realities. For all the criticism of the US dollar, it remains the only real international currency recognised by global markets - US dollar bonds sold by the same emerging-market countries pushing for a new global currency are outperforming debt traded in reais, roubles and yuan. Any attempt to replace the US dollar as the global currency, which has underpinned exchange rates since the 1971 collapse of the Bretton Woods system, could likely lead to major dislocations in trade, economic activity and financial markets.

Inside the Goldman money machine

Business Times - 07 Jul 2009

Ex-employee charged with stealing secret computer codes that help the firm generate millions of dollars in profits each year

By MATTHEW GOLDSTEIN

DID someone try to steal Goldman Sachs' secret sauce? While most people in the United States were celebrating the Fourth of July holiday, a Russian immigrant living in New Jersey was being held on federal charges of stealing secret computer trading codes from a major New York-based financial institution. Authorities did not identify the firm, but sources say that institution is none other than Goldman Sachs.

The charges, if proven, are significant because the codes that the accused, Sergey Aleynikov, allegedly tried to steal are the secret sauce to Goldman's automated stock and commodities trading business. Federal authorities contend that the computer codes and related-trading files that Aleynikov uploaded to a German-based website help this major financial institution generate millions of dollars in profits each year.

The platform is one of the things that gives Goldman an advantage over the competition when it comes to the rapid-fire trading of stocks and commodities. Federal authorities say the platform quickly processes rapid developments in the markets and using secret mathematical formulas, allows the firm to make highly-profitable automated trades.

The criminal case has the potential to shed light on the inner workings of an important profit centre for Goldman and other Wall Street firms. The charges also raise serious questions about the safeguards that Wall Street firms deploy to protect these costly- to-build proprietary trading systems.

The criminal case began to unfold on the evening of July 3, when Aleynikov was arrested by FBI agents at Newark Airport after returning from Chicago. Aleynikov apparently had just started work with another big firm in Chicago after leaving his previous employer in New York in early June. It appears that the financial institution allegedly victimised by Aleynikov had alerted federal authorities that its former employee might be up to no good.

On July 4, Aleynikov was processed on a 'theft of trade secrets charge' in a criminal complaint. As of Sunday morning, he was still being held at the Metropolitan Correction Center in Brooklyn.

A Goldman spokesman declined to comment on the incident. Calls to Aleynikov's home in New Jersey, which he shares with his wife, were not returned. A spokesman for the United States Attorney's Office in Manhattan did not comment.

The Federal Bureau of Investigation, in charging Aleynikov, says he began working for the major financial institution in May 2007 as a computer programmer and left in early June. That matches the description of a man named Serge Aleynikov on the social networking site LinkedIn (the difference in spelling of the first name could not be immediately explained).

Ballroom dancer

The biographical information for Aleynikov on LinkedIn says he joined Goldman in May 2007 and was vice-president for equity strategy. The bio says he was responsible for 'development of a distributed real-time co-located high-frequency trading platform'.

The case against Aleynikov may explain why the New York Stock Exchange moved quickly last week to stop reporting program stock trading for its most active firms. Goldman was often at the top of the chart - far ahead of its competitors.

It's possible Goldman had asked the NYSE to stop reporting the number after it discovered that someone may have infiltrated the proprietary computer codes it uses.

Here's the way the criminal complaint describes the Goldman trading platform: 'The Financial Institution has devoted substantial resources to developing and maintaining a computer platform that allows the Financial Institution to engage in sophisticated high-speed, and high-volume, trades on various stock and commodities markets. Among other things, the platform is capable of quickly obtaining and processing information regarding rapid developments in these markets.'

Federal authorities appear to believe Aleynikov may have had help. The German website that he is accused of uploading the stolen information to is registered to a person in London.

While the case is still unfolding, there is more information to unearth about Aleynikov. For instance, it appears that he and his wife are competitive ballroom dancers - there are videos of them on YouTube.com.

Many questions remain. Which Chicago firm hired Aleynikov? The job he took in Chicago, according to the criminal complaint, paid nearly three times more than his US$400,000 salary at Goldman.

Also there's more to learn about anyone who might have been helping him and the fallout the case may have for Goldman.

When he was arrested, Aleynikov told the FBI he 'only intended to collect 'open source' files on which he had worked, but later realised that he had obtained more files than he intended'. Quick, get this guy a good lawyer.

One question investors need to ask is whether this incident will have any impact on Goldman's second-quarter earnings.

The alleged wrongdoing by Aleynikov took place at the beginning of June - although it's not clear if it had any material impact on automated trading. -- Reuters

Matthew Goldstein is a Reuters columnist. The views expressed are his own.