Capital markets are being pressed to the limit to cope with the market volatility around U.S. trade tariffs
It’s all in a day’s work for event-driven IT systems
Himanshu Gupta, Senior Architect, Capital Markets at Solace explains how capital market firms, handling billions and billions of data, can navigate turbulent times
Recent political changes and the volatility around the U.S. trade tariffs have led to record-breaking trading volumes. The resulting huge increases in data volume mean that many trading companies are reaching data capacity limits. It comes as no surprise that a Celent Dimensions IT Priorities & Pressures survey on the capital markets sell side found that 68% plan to replace or significantly upgrade one or more critical systems this year.
IT systems and data must be up-to-date, fast-acting, agile, and flexible no matter the market volatility. This is beyond the reach of traditional batch or even API-based approaches. But for systems underpinned by an event-driven integration platform, it’s all in a day’s work.
Unflappable performance: how event-driven IT thrives – no matter the political turmoil
“Following the announcement by the U.S. government that the aggressive tariff policy will continue, equity volumes almost hit 30 billion shares, more than doubling average daily of 12.2 billion last year. As masses of data and information are passed around the world, the need to operate in real-time, down to the millisecond, is imperative.
“Recent global trade tariff announcements have landed the world’s economy in turmoil, and the fallout is expected to continue. This news has left many investors rotating their holdings within stock portfolios. In the case of more changes, businesses need the reliance that they can trade in real-time, and share critical information accurately, safely, and efficiently.
“Here’s where an event-driven platform – aka an event mesh – comes into play, helping maintain a rock steady infrastructure so essential in volatile times.”
1: No data is the same: Every value matters when executing trades
“It’s important to note that not all messages are equal – 100 billion log messages being streamed to be archived is not the same as 100 billion of trading data that needs to be delivered with zero message loss, with possibility of severe monetary loss if you are not successful. It’s mission-critical!
“The high speed, high octane, nature of hedge fund trading requires some of the most sophisticated tech stacks in the capital markets sector. The need for speed and integrity of data exchange is paramount to execute every trade – but must also be supported by high resilience and built-in security.”
2: Every microsecond counts: Gain the edge with zero latency
“Market data is high volume and extremely volatile – hedge funds receive up to microsecond data feeds from sources such as Refinitiv and Bloomberg. Once market data is consumed, it is fanned out to downstream consumers such as Risk, PnL, OMS, and EMS systems.
“The message volumes can vary significantly day-to-day but depending on the number of securities a hedge fund is trading and the global markets it’s participating in, these volumes can be in millions of messages per second – definitely the case as a result of new trade tariffs. A performant message broker must be capable of handling such high volumes and be able to scale horizontally as the volumes continue to increase.
“Additionally, these messages need to be delivered with minimum latency. For example, to achieve latency in microseconds, messages need to be delivered in memory without being persisted to disk. This comes at the risk of potentially losing some messages, but that’s acceptable for a market data distribution use case which requires at-most-once quality of service.
“That’s what gives an edge in a capital markets environment – when you’re making your decisions, you need to have the latest view of the market, the exchanges, and what’s happening to the stock price. Consider how quickly FX markets can move due to macro events such as trade tariffs.”
3: Every message counts: Send the right message for every trade
“Unlike market data distribution, trade order distribution use case requires at-least-once quality of service. Trade order distribution spans the pre- and post-trade life cycle and ranges from origination of trade ideas to trade execution to post-trade settlement and reporting.
“Message volumes of trade orders are much lower than market data, but every message needs to be securely delivered. To achieve this quality of service, message brokers need to leverage persistence and acknowledgments.
“As messages are delivered from publisher to broker to consumer, acknowledgments are shared to ensure message delivery is guaranteed which ensures a hedge fund’s trading stack will never lose a message. The additional overhead means the latency will be higher than at-most-once quality of service but that’s acceptable given the additional assurance of delivery. Not many brokers can support both quality-of-service which leads to some hedge funds using different brokers and overcomplicating their technology stack.
It’s all in a day’s work for an event-based IT infrastructure
“Capital Markets firms must always ensure they are prepared for the market volatility that’s expected in the near future – as tariffs back and forth rumble on. There is no better way to do so than with a resilient events-based technology platform.
“Take this use case. One of the world’s largest hedge funds uses an event-enabled solution to distribute trader order updates published by local instances of their OMS over a global event mesh. The order updates from regions such as New York, London, Hong Kong, Singapore, and Tokyo are consolidated back to its primary data center for risk analysis of their positions in real-time. Job done and that was just the morning workout!”
Himanshu Gupta, Senior Architect, Capital Markets at Solace
As one of Solace’s solutions architects, Himanshu is an expert in many areas of event-driven architecture, and specializes in the design of systems that capture, store and analyze market data in the capital markets and financial services sectors. This expertise and specialization is based on years of experience working at both buy- and sell-side firms as a tick data developer where he worked with popular time series databases kdb+ and OneTick to store and analyze real-time and historical financial market data across asset classes.
