Issue 7 of A-Team Group’s contributed thought leadership quarterly Low Latency - Are You Performing? is now available for download.

Low latency technologies continue to be deployed by the financial markets - driven by the need to adopt them simply to stay in the trading game, and hopefully win at it. But low latency covers a wide range of components - from networks, to server hardware, to operating systems and middleware, to middleware, and to applications. In the low latency equation, there are many moving parts.

And low latency has moved beyond the task of delivering market data to algo trading engines, and coping with surging market volumes. It is now a requirement for every link in the trade execution and processing chain, even beginning to have relevance to risk management operations. In short, low latency is the new normal.

With that in mind, check out the round table inside to get the views of several different players in the marketplace - each brings a different perspective, whether it be high performance messaging, low latency analytics, market data delivery, global order routing or infrastructure issues.

Also inside you can read extended commentary from Citihub and SunGard, each bringing their own unique take on the opportunities and challenges of operating in today’s low latency trading environment. This is very much real-life wisdom from technologies on the cutting edge.

We hope you find this issue of Low Latency - Are You Performing? interesting. Remember that you can keep up with all low latency developments at www.low-latency.com. And for broader coverage of IT in the financial markets, check out www.a-teamgroup.com.

Contributors:

  Low Latency Are You Performing-7 (1.0 MiB)

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An exponential expansion of market data volumes in recent years has been caused by the confluence of a number of technology and business drivers – from the emergence of electronic communication networks (ECNs) to the advent of smart order routing systems and algorithmic trading engines. Coupled with the increasingly divergent data sets needed to support complex decision systems, there is now a requirement for high performance data management infrastructures throughout the enterprise supporting high frequency automated trading as well as traditional market data processing functions like securities master file updates, risk analysis, and back-office trade support.

The time is ripe for change in the mechanisms financial institutions use to deal with data, long regarded as the lifeblood of the trading environment, but increasingly seen as an asset that needs to be collected and managed properly – and efficiently – if it is to deliver on its promised benefits. Find out how by downloading your free copy now.

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Over the past couple of years, Complex Event Processing has emerged as a hot technology for the financial markets, and its flexibility has been leveraged in applications as diverse as market data cleansing, to algorithmic trading, to compliance monitoring, to risk management. CEP is a solution to many problems, which is one reason why the emerging marketplace is growing, with many vendor options to choose from.

But CEP is not a solution in itself, and so technologists need to concern themselves with how to integrate it within a complete application architecture, how it can best be leveraged, and how to streamline development and deployment. And with multiple vendor choices, choosing the right CEP approach for the job is an important, and early, activity for firms looking to adopt it.

Expect CEP offerings to become more complete in terms of functionality - especially in the event modelling area - and to also exploit technologies that will boost their performance. And expect CEP to become further embedded across the entire trade processing and operations chain. The scenario of CEP becoming an infrastructure component - just like a database or messaging platform is now - is a near certainty. But as for when that will happen is open to debate. The entry into the market by IT heavy hitters like IBM and Oracle - and Microsoft is on its way - will likely drive the infrastructure-level adoption of CEP.

Also expect the CEP marketplace to evolve commercially, as offerings from different vendors become more full function. We’ll see different business models, including cloud delivery, partnerships, acquisitions and mergers. And open source will play a bigger role. As will CEP itself, touching all aspects of the trading enterprise.

Contributors:

  Special Report: Complex Event Processing (861.5 KiB)

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The adoption of algorithmic trading by the mainstream has created a requirement for high-quality historical data for development, testing and maintenance of trading strategies.

Until recently the exclusive remit of Tier 1 investment banks, algorithmic trading is becoming democratized as smaller brokerages and boutiques implement increasingly affordable high-performance trading platforms. This gives them the opportunity to differentiate their offerings to buy-side clients.

Key to success here is the quality of data. Nowhere is the adage ‘bad data in, bad data out’ more true than in the area of algorithmic and quantitative trading, where the use of highly granular tick and order book data is crucial to producing trading strategies that perform.

Furthermore, increased regulatory scrutiny means firms need to recreate market conditions current during their trading activities, so as to demonstrate due process in meeting their best execution obligations. This all points to the need for a considered approach to sourcing and managing historical data in support of high-performance trading activities.

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They may be complex and burdened with a bad reputation at the moment, but derivatives are here to stay. Although Bank for International Settlements figures indicate that derivatives trading is down for the first time in 10 years, the asset class has been strongly defended by the banking and brokerage community over the last few months.

The industry is, however, on course for a significant overhaul of the regulatory regime governing the OTC derivatives market, both in Europe and the US. This, of course, means that the post-trade processing of these instruments is set for big changes. Credit default swaps (CDSs) are the first of the credit derivatives to be ushered onto clearing counterparties in a bid to reduce counterparty risk, but they will likely not be the last.

Moreover, the market is also awaiting the introduction of an alternative standard to the current five character Options Price Reporting Authority (Opra) codes next year. Earlier this year, the Options Clearing Corporation (OCC) was named as the operator of the new options symbology system, which has been estimated to cost the industry around US$250 million to introduce.

All of these changes are likely to have a significant impact on the data management systems for these complex instruments, requiring the introduction of new processes and procedures. A challenge indeed for the vendor community.

Contributors:

  Reference Data Review Special Report - Impact of Derivatives on Reference Data Management (1.0 MiB)

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Whether they accept it or not, sell-side institutions are finding themselves in the unfamiliar role of information technology vendor. The adoption of algorithmic trading models by buy-side firms of all shapes and sizes is shifting trading strategies, and the technology infrastructure to supply and support them, from the realm of nice-to-have appendage to must-have service offering.

With more sell sides than ever offering both standard benchmarks and their own takes on old favourites, competition between algorithmic trading strategies is heating up. And it’s not all about alpha. The buy side doesn’t like surprises. What many fund managers are seeking from their sell-side suppliers is certainty of execution, low market impact and some degree of accuracy on hitting stated targets.

As a result, brokers and their technology suppliers are all working furiously to help differentiate algorithmic offerings, launching custom and so-called ‘adaptive’ algorithms, and taking great lengths to prove that their models perform as stated on the tin.

In essence, the world of algorithmic trading is entering a new phase as models’ acceptance by the wider marketplace is increasing pressure on firms to perform and, to some extent, productize their offerings. Expect more innovation, more customization and more choice.

Contributors:

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  Algorithmic Trading - Attracting The Buy Side (1.6 MiB)

Eight years on from the original Giovannini report, and three years after the publication of the Giovannini Protocol, how far has the industry progressed with implementing the solution to eliminate Barrier 1? Who has taken the initiative, and who is lagging behind? Is elimination of Barrier 1 still a priority for the industry in light of the unprecedented circumstances heralded by the global financial crisis? Can the March 2011 deadline be met, and is the demise of Barrier 1 in sight?

This paper, authored by SWIFT, examines the progress that has been made to date in eliminating Barrier 1, and argues that the drivers for adoption of the Giovannini Protocol are stronger than ever. It argues that other industry initiatives such as Target2Securities (T2S) and the Code of Conduct actually make progress on Barrier 1 even more important, and should not be used as distractions. It also proposes next steps the industry should take in order to ensure the adoption of this readily available solution to the long-understood problem of inefficient communications, which cause low levels of interoperability between players involved in clearing and settlement in the EU.

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The lack of a single, holistic view of enterprise risk among financial institutions has been identified as a key factor in the ongoing financial crisis. With data organized along business lines – largely on a silo basis – risk managers have been merely measuring the risk of firms’ vertical operations, rather than truly managing it. The result has been a lack of real information on holdings, exposures and counterparties, and an incomplete view of enterprise risk.

Industry practitioners expect regulators to impose a more stringent regime upon the financial services industry in the wake of recent events. Meanwhile, risk managers are struggling to establish a view of group-level risk. It’s becoming clear to executives that that a truly enterprise-wide approach to risk management must be underpinned by a consistent, managed approach to data.

The need to establish a standard platform that addresses the data management challenge an enterprise approach to risk requires, is now being recognized by financial institutions as a critical element as they review their risk operations. This Briefing, produced by A-Team Group on behalf of Sybase, gives some insight into issues surrounding the creation of a standard enterprise-wide data architecture and offers guidance on how a risk ecosystem can be achieved. Download your free copy now.

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New Japanese translation of this white paper is available for download below. To download the English version, click here.

Written by the editors of A-Team Group, commissioned and sponsored by Standard and Poor’s

As the financial world continues to grapple with the fallout of the credit crisis, one thing is clear: managing risk is now paramount to the surviving financial institutions. But you can’t manage what you don’t know.

Many financial institutions have been caught in the current environment through a lack of awareness of their true exposure to risky investments, and ultimately to those entities which defaulted, leading to record losses and write-downs across the industry.

There is an immediate and pressing requirement from financial institutions for a usable global enumeration standard for business entity identifiers. Getting risk management houses in order is a clear driver, but this also comes against the backdrop of the anticipated onslaught of new regulations that financial institutions will have to contend with, along with the ongoing need to improve operational efficiencies, reduce errors, and reduce costs.

So while industry bodies continue the lengthy process of agreeing on a standard format to bring to market, is there an immediate step that financial institutions can take to fill this void? We believe there is, and it is a step that a number of fund managers and investment banks are already piloting.

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The Who, What, When and Why of the Algorithmic Trading Universe

The A-Team Algorithmic Trading Directory - 2009 Edition is now available for download–with updated information and more profiles. The Algorithmic Trading Directory is the industry’s only reference for professionals active in the algorithmic and electronic trading community. The directory provides an easy-to-use guide to help buy-side professionals understand the algorithms on offer from their brokers and other trading counterparties and suppliers, where to find them, and who to talk with about them.

The Algorithmic Trading Directory lists algorithmic trading services offered by brokers, investment banks, and other sell-side financial institutions to their buy-side customers, in the form of detailed profiles of the firms’ electronic trading service offerings. Each profile features descriptive information on the proprietary algorithms on offer, including analysis of who should be using them, under what market conditions and to what end.

The Directory also includes a guide to the various forms of generic algorithms used and offered by major sell-side players, definitions of key terms, and abstracts of relevant articles with A-Team analysis.

The Algorithmic Trading Directory is available now! If you’re logged in, you can download your free copy by clicking on the PDF image below.

If you have not logged in or previously created a free user registration account, you can fill in the registration form below to create your free user account now. Once created, you can log in to see the PDF image, which you can click in order to download the Directory.

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The current financial climate has meant that risk management and compliance requirements are never far from the minds of the boards of financial institutions. In order to meet the slew of regulations on the horizon, firms are being compelled to invest in their systems in order to cope with the new requirements.

Data management is an integral part of this endeavour, as it represents the building blocks of any form of risk management or regulatory reporting system. Only by first understanding the instruments being traded and the counterparties involved in these trades can an institution hope to be able to get a handle on its risk exposure. The fall of Lehman Brothers and the ensuing chaos was proof enough of the data quality issues still facing the industry in this respect.

Regulators are demanding more and more data transparency from all players in the financial markets and this has meant that the ability to access multiple data silos has become essential. A siloed mentality towards data will no longer be acceptable, as these regulators seek a holistic view of positions and the relationships between counterparties.

All of this represents a significant challenge to the data management community, given that there are standards lacking in many areas, for example business entity identification. But with great challenges come tremendous opportunities to solve data management issues that have been in the background for far too long.

  Reference Data Review Special Report Risk & Compliance (766.8 KiB)

An indispensable guide to valuations professionals seeking providers of services in the asset valuations market.

A-Team Group’s latest release in its series of directories – available for FREE download – focuses on vendors of valuations data, models and analytics. But this is not just another list of firms with their telephone numbers – you can get that from Yell. Many leading players have chosen this publication to showcase their products and services with much more rounded company profiles. In addition, our ‘Ask the Experts’ section provides a forum for some of these firms to address the critical issues facing their companies, sectors and the industry as a whole. We are sure that these perspectives from the inside will prove interesting reading for anyone involved with asset valuations.

In addition to the vendor’s information and views, A-Team has also added our independent commentary as to the current valuations vendor landscape and how this might be shaping up in the future. We first look specifically at recent developments in the pricing and evaluations markets, which has proved surprisingly dynamic in the last couple of years. We then review the models and analytics industry – a frequently neglected topic when looking at valuation options – and assess what major trends are developing here.

This Directory augments the A-Team Valuations Briefing service, which covers all the topics important to financial valuations such as accounting standards, regulatory changes and industry developments in the provider, servicer and advisor sectors. It also encompasses our important annual Valuations User Survey, a true ‘State of the Nation’ review of how actual practitioners are going about their business (for more information on that report, click here).

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The English version of this white paper is available for download below. To download the Japanese version, click here.

Written by the editors of A-Team Group, commissioned and sponsored by Standard and Poor’s

As the financial world continues to grapple with the fallout of the credit crisis, one thing is clear: managing risk is now paramount to the surviving financial institutions. But you can’t manage what you don’t know.

Many financial institutions have been caught in the current environment through a lack of awareness of their true exposure to risky investments, and ultimately to those entities which defaulted, leading to record losses and write-downs across the industry.

There is an immediate and pressing requirement from financial institutions for a usable global enumeration standard for business entity identifiers. Getting risk management houses in order is a clear driver, but this also comes against the backdrop of the anticipated onslaught of new regulations that financial institutions will have to contend with, along with the ongoing need to improve operational efficiencies, reduce errors, and reduce costs.

So while industry bodies continue the lengthy process of agreeing on a standard format to bring to market, is there an immediate step that financial institutions can take to fill this void? We believe there is, and it is a step that a number of fund managers and investment banks are already piloting.

DOWNLOAD THE WHITE PAPER

Issue 6 of A-Team Group’s contributed thought leadership quarterly Low Latency - Are You Performing? is now available for download.

Even as the financial markets undergo unprecedented turmoil, the drive to lower latency shows no sign of abating. Why is this? Put simply, it’s because low latency technologies enable those competing in the financial markets - whether they be sell-side firms, buy-side firms, exchanges or alternative trading venues - to run ahead of the pack. And to win. Such concepts are explored in the round table debate inside, and we thank those that participated for their insight and wisdom.

Also inside are two takes on the world of low latency. Ian Salmon from Fidessa explores how latency impacts the process of order routing, especially seeking out best execution in new fragmented markets. In short, without low latency architectures, these new markets could probably not exist.

Exploring latency from a technology angle is Neal Weiss of Sun Microsystems. Until recently, storage and latency have been at odds with one another. Now, with the advent of solid state disks, that divide is being overcome.

We hope you find this issue of Low Latency - Are You Performing? interesting. Remember that you can keep up with all low latency developments at www.low-latency.com.

Read contributions from Fidessa, Sun Microsystems, Clearsight Networks and RTI.

  Low Latency Are You Performing-6 (2.3 MiB)

As the global financial markets continue to shift towards electronic trading, the speed at which trading is able to take place establishes the winners and the losers among participants in the trading chain. Sun Microsystems can help those participants to eliminate latency throughout the trade cycle, as detailed in “Building a Low Latency Infrastructure for Electronic Trading - A Sun Microsystems Blueprint“. The white paper – written in conjunction with A-Team Group – examines the hotspots within an electronic trading environment and considers routes and technologies that might contribute to reducing or even eliminating latency.

  Building_A_Low_Latency_Infrastructure_for_Electronic_Trading (223.5 KiB)

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The ongoing turmoil in financial markets is creating a tough time for European trading technologists and connectivity specialists. As MiFID slowly grinds its way through the marketplace, new execution platforms are launching on what feels like a weekly basis. The European marketplace is seeing liquidity fragment – perhaps more slowly than some would have predicted or would like – between established primary exchanges and an array of new execution platforms, including multilateral trading facilities, broker-sponsored dark pools, independent dark pools and combinations of the above.

It’s finally dawning on the European market that to get access to this liquidity requires some smarts. And many are turning to smart order routing (SOR) technologies to provide that smarts. Some market practitioners have drawn upon their experience in the US, where SOR has been a required capability for some time. As ever, though, they’re finding the realities of the European market a tad more complex. Part of this complexity involves the lack of a single currency – and its impact on fungibility – and of a single clearing agency, like the DTCC in the US.

But there are other complexities, too. In this special report, our industry experts look at some of the challenges facing those who seek to deploy SOR technologies in the unfolding European marketplace. Aside from the structural issues unique to Europe, the financial crisis and its impact on trading volumes is adding to the challenge, by raising questions about the credibility of new platforms even before they come to market. With budgets everywhere under intense scrutiny, the decision to connect is no longer the no-brainer it once was.

  Smart Order Routing The Route to Liquidity Access and Best Execution (1.1 MiB)

2008 will be remembered as the year when risk management moved from being a checkbox for compliance officers and regulators to a fundamental pre-requisite for operating a trading business. Lack of awareness and mismanagement of risk has lead to catastrophic events at the corporate, and even systemic, level.

Despite past investment in risk management solutions, firms have learned that risk management at the product, portfolio or even business unit level does not necessarily scale well to provide a view of enterprise risk, where cross-asset class reporting and processing throughout the entire trade life cycle is a requirement.

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The trading environment in Asia is strikingly different to the US and Europe, given the often vast differences between domestic regulations and market practices. This lack of harmonisation across the region proves problematic when attempting to determine concepts such as best execution and this is holding back the development of electronic trading to some extent. Moreover, the fact that the Asian stock exchanges have traditionally been very protective of their own markets and tend to be domestically focused has not helped matters. When the environment is one country, one execution venue, the incentive is much lower to adopt electronic trading methods and processes.

However, despite these drawbacks, the Asian markets have witnessed a lot of technological progress over the last few years. Many markets have started to open themselves up to direct market access and the participation of foreign institutions in these markets has driven forward change. This is particularly the case in markets such as Hong Kong, Singapore, Japan and Australia, which are often dubbed the tier one Asian markets.

The Asian markets are also waking up to the benefits of alternative execution venues, especially in these tier one markets. But what success have these venues achieved so far and what impact have they had on the market as a whole? Furthermore, are developments such as smart order routing rising in importance as the number of execution venues expands?

  AsiaMarketsIT.com Special Report: Liquidity Access in Electronic Asian Markets (608.9 KiB)

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The current financial crisis has highlighted that financial institutions do not have a sufficient handle on their data and has prompted many of these institutions to re-evaluate their approaches to data management. Moreover, the increased regulatory scrutiny of the financial services community during the past year has meant that data management has become a key area for investment.

But given that IT spend is down as a whole, how is this impacting the implementation of enterprise data management (EDM) projects? Is strategic investment in particular areas of the processing chain with regards to data taking priority over wider EDM implementations?

The EDM Council celebrated its third anniversary this year and it has achieved some level of success in the industry in the past three years by providing data management with the attention it deserves. However, despite the progress in getting people talking about data at an abstract level, a report by the EDM Council earlier in the year indicates that EDM is still not on the C-level radar. According to the report, data management has a heightened prominence and is more mature than it was three years ago, but it is still seen as a tactical problem.

What lies ahead for the EDM community this year?

  RDR Special Report: Enterprise Data Management (801.1 KiB)

Issue 5 of A-Team Group’s contributed thought leadership quarterly Low Latency - Are You Performing? is now available for download.

Read contributions from Endace, Juniper Networks and SeaNet Technologies.

  Low Latency-Are You Performing? Issue5 (623.6 KiB)