1. MIS 3090: IT for Financial Services Bond Market Technology and Web Services May 30, 2016

2. 2/20 Bond Types Agency (governmental) Mortgage-backed (see MBS)  Ginnie Mae, Fannie Mae, Freddie Mac  Pay higher rate than treasury bonds  Sallie Mae riskier than mortgage backed (!) Municipal  State, local governments and utilities  Free of federal and some state and local taxes

3. May 30, 20163/20 Bond Types (cont.) Corporate – used to fund long-term projects Riskier, so higher return Convertible Callable Zero-coupon

4. May 30, 20164/20 CBOT  Open outcry market located around auction pits  Electronic trading is available through e-cbot  Links to LIFFE as part of Euronext and Eurex

5. May 30, 20165/20 IT and APIs

6. May 30, 20166/20 Schwab issues periodic alerts as to new bond issues

7. May 30, 20167/20 self-service model

8. May 30, 20168/20

9. May 30, 20169/20

10. May 30, 201610/20 Auctions are announced

11. May 30, 201611/20 The government is acting as its own broker – there is no need for an intermediary in order for you to become an investor.

12. May 30, 201612/20 Bond Market Association

13. May 30, 201613/20 Information sources on bond types…

14. May 30, 201614/20 Don’t forget corporate bond…

15. May 30, 201615/20 Municipal bonds used to finance important ventures…

16. May 30, 201616/20 EDI, EFT, and Web Services EDI – Electronic Data Interchange Been around for ages; low tech >100,000 businesses use this Financial EDI – for exchange of payments EFT – any transfer of funds via electronic means Used by banks and government

17. May 30, 201617/20 Electronic Data Interchange (EDI) Materials releases price updates Shipping notices Discrepancy reports Payments remittance information X X XX Invoice Order Management Shipping Department Accounts Receivable Invoice Purchasing Department Receiving Department Accounts Payable X X System P. O.Order Via USPS

18. May 30, 201618/20 What an EDI Invoice Looks Like… ST 810 means invoice EDI Implementation Conventions set the rules for the data stream

19. May 30, 201619/20 The Path to Web Services  Motivation: information must be shared across platforms  EDI – Relatively inflexible – Expensive to maintain – Mainframe-era, so what happens when servers appear?  Legacy systems were not designed to share data  ERP possibilities – Expensive – Error prone – Maintenance problems if one partner in transaction changes  Internet – Leverage the strengths of HTML

20. May 30, 201620/20 Understanding the “Lingo”… (part 1) en USD SOAP William P. Wagner 4225…. 03-2005 First USA Bank N.A. 500.00 XML XML: Extensible Markup Language SOAP: Simple Object Access Protocol

21. May 30, 201621/20 Understanding the “Lingo”… (part 2)  What does Expérian do with this SOAP message? – WSDL – interprets what needs to be done and generates a SOAP response to the originator 4225…. 9416102 Best Buy Inc. XML SOAP WSDL WSDL: Web Services Description Language UDDI: Universal Description, Discovery and Integration UDDI 411

22. May 30, 201622/20 For Next Class…  Read − FleetBoston case − Guest speaker Joe Leinhauser from JPMorgan