©2013 software ag. all rights reserved. dr john bates cto, software ag 12 th november 2013 turning...

©2013 Software AG. All rights reserved.

Dr John BatesCTO, Software AG

12th November 2013

Turning Market Crisis into Competitive AdvantageThe Clue’s in the (Fast) Big Data

©2013 Software AG. All rights reserved. For internal use only

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Agenda

• Recurring Crises in Capital Markets

• The Consequences Just Keep Getting Bigger

• “Unwanted Behaviors”

• Examples from:

• Market Abuse & Manipulation

• Rogue Trader Detection

• Pre-Trade & Rogue Algorithm Checks

• Kill Switches & Circuit Breakers

• New Paradigm & New Technology


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Recurring Crises in Capital Markets

Marketmanipulation

Ever-evolvingregulation

“Fat Finger” trading errors

Rogue traders

Wild algorithms


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The Consequences Just Keep Getting Bigger

Trading Losses

Regulatory Fines

Reputational Damage

Credit Rating

Insolvency!

The End of HFT?


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Control Failures are all examples of “Unwanted Behaviors”

Crisis can come from anywhere, anytime, on anyone's watch!!

•High touch or low touch trade flows•By clients or staff•Pre-meditated or accidental•Breach regulation or simply internal policies•Be labelled as Risk or Compliance•All “Unwanted Behaviors”


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Trading technology is about behaviors too! Uncovering market behaviors in Big, Fast Data and profiting from them…

Complex Event

Processing

In Memory

DB /Data Grid

FastMessaging

Visual Analytics


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Mismatch Between Trading Technology and Risk & Compliance Technology

VS.


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Mismatch Between Trading Technology and Risk & Compliance Technology

A Ferrari to catch a Ferrari


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Unwanted Behavior Detection Can Utilize Lessons Learned from the Trading World…

Complex Event Processing

In Memory DB /Data Grid

FastMessaging

Visual Analytics


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Visual Analytics / Alerting

Market Abuse & Manipulation

Market Data

Email, Social Media etc

Trade Data

Order Data

News

“Behavior” monitoring

Faster decision making for better business with instant action on real-time insights

Fast access to large and varied data sets

RegNMS, Market Abuse Directive•Insider trading•Front Running•Layering•Quote Stuffing•1-2-3 Go•Wash Trades


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Market Data


Trade Data

Order Data

News




“When a buy and sell trade occur within any 500 millisecond window for the same instrument by two different firms and volumes and price are within 1%, signal a 1-2-3-Go alert.”



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Market Data


Trade Data

Order Data

News




“If a trade occurs for an instrument not usually traded by that trader or it is unusually large for that trader and a related news article occurs within 5 minutes which moves the market by > 10% within 30 minutes, signal a Insider Trading alert.”




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Rogue Trader Detection

HR Data

Physical Access Data

Trade Data

Settlement & Clearing

Calendar Data




Guidelines on Unauthorized Trading

Checks on•Cancels/amends•Unusual profits•Unusual hours•Vacations



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Rogue Trader Detection

HR Data

Physical Access Data

Trade Data

Settlement & Clearing

Calendar Data




If number of cancel/amends for a trader is greater than 2 times

that of peer group over the same period then signal Unusual Concentration of

Cancellations alert



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Pre-Trade & Rogue Algorithm Checks

Trading Venue(s)Pre-Trade Risk Firewall

In-house ExecutionAlgos

Instant action on real-time insights, enabling faster risk controls

Ultra-fast access and messaging capabilities

DMA

Sponsored Access

Regulating automated flows (DMA etc)

Checks on•Price•Volume•Order:Trade•Event rate



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Pre-Trade & Rogue Algorithm Checks

Trading Venue(s)Pre-Trade Risk Firewall




DMA

Sponsored Access

If order quantity is greater than 2 times the average

traded volume for the instrument then signal

Unusual Order Quantity alert



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Panic button

Kill Switches

Pre-Trade Risk Firewall




DMA

Sponsored Access

Trading Venue(s)


Exchanges & Broker/Dealers

Capability to:•Cancel all open orders•Block all new orders•Auto-hedge partially executed spreads


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Panic button

Smart Kill Switches

Pre-Trade Risk Firewall




DMA

Sponsored Access

Trading Venue(s)

On Unusual Order Quantity alert, block all new orders

from that algorithm, cancel all pending orders and signal a Potential Rogue Algorithm

Alert.Request manual intervention

to unblock algorithm



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New Paradigm Platform Requirements

Mobile people & devices

Hadoop & Data Warehouse

Financial Events

Social Media Events

System alerts, sensors & machines

Real-Time Analytics& Intelligent Action

Low Latency Universal Messaging

Real-Time Visual Analytics

In-Memory Data & Analytics

Cloud

$£€¥


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Fast Big Data Platform

Real-Time Analytics

Universal Messaging

In-Memory Data

Visual AnalyticsPRESTO

Stream Big Data to/from any platform or application!

Act fast to limit damage!

Enrich Real-time analytics for

more effective monitoring!

Greater visibility & insight!

A common behavioural monitoring platform to identify all unwanted behaviours from big fast data

Flexible platforms offer hybrid of Buy and Build!

Open IT platforms do more with less!


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Investigative tools to analyse behaviour in context of the market


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News event seems to precede a market down turn

©2013 software ag. all rights reserved. dr john bates cto, software ag 12 th november 2013 turning...

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