The official theme of this year’s annual Securities Industry and Financial Markets Association technology show-“Tech Be Nimble! Tech Be Quick!”-was borne out by a tour of the exhibition halls. With speed becoming increasingly critical to trading-related applications, dozens of vendors emphasized their low-latency, high-throughput services for buyside and sellside firms.
Altogether, some 300 vendors showcased their wares at SIFMA’s Technology Management Conference and Exhibit. About 7,000 financial industry attendees made the rounds over three days.
The need for speed and low-latency applications has been driven, in large part, by the Securities and Exchange Commission’s Regulation NMS, which fueled a surge in automated and algorithmic trading. With more automated trading, firms must be able to process and distribute the larger volumes of incoming market data to various internal applications simultaneously and make trading decisions faster.
The goal is to shrink latency, or time delay, wherever it exists, whether it’s in market data transmission, network communications or execution-related processes. And the contest, in some cases, is now registered in microseconds, not just milliseconds. A microsecond is one-thousandth of a millisecond, or one-millionth of a second.
The granddaddies of complex event processing (CEP) were all at the tech show. Progress Software’s Progress division, StreamBase Systems, Aleri and others showcased their offerings for an increasingly speed-sensitive audience. Event processing refers to the high-speed search for patterns or “events” in vast streams of data that can be used to automatically generate trading decisions, or for other activities such as trade monitoring and compliance.
CEP News
Perhaps the most surprising application for commercial CEP software comes from the U.K.’s Financial Services Authority. The FSA will use Progress Software’s Apama event processing platform to provide real-time fraud detection capabilities starting early next year.
The FSA’s new Surveillance and Automated Business Reporting Engine (Sabre II) is the first project, said John Bates, founder and vice president of Progress Apama, in which a regulator will look for illegal or potentially harmful complex trading patterns in real time. This capability will allow the FSA, if warranted, to potentially take action before those events move the market.
The FSA already has a portfolio of hundreds of patterns it intends to look for in trading data. FSA staff will also be able to readily “open up new patterns they want to look for or create new scenarios they want to monitor,” Bates said. They can compare trading events as they occur to similar past events, including those involving the same traders, and can customize alerts for specific traders or firms. The regulator will launch this new monitoring effort with equities.
StreamBase Systems released StreamBase 5.0 at the SIFMA tech conference. The CEP platform enables customers to build applications faster and to query, process and analyze real-time and historical data at a rate of hundreds of thousands of messages per second. The platform supports more advanced order types, various trading and execution strategies, and real-time transaction cost analysis.
Integrated Solutions
Software company Sybase also announced that its Real-Time Analytics Platform now integrates with StreamBase’s CEP platform. Firms with large data storage requirements can use the joint solution for back-testing algo strategies and for risk analysis.
Aleri’s newly released Aleri Streaming Platform includes a dashboard for visualizing data, based on technology licensed from software firm SL Corp. Customers can use the platform for a range of activities in the trade life cycle-from generating prices to real-time risk management, position keeping, and the aggregation and analysis of real-time data feeds.
As electronic trading and low-latency processes demand coordination between multiple systems and applications, many vendors are partnering to provide quasi-packaged or integrated services. CEP provider Coral8 is teaming with Lab49, a consulting services firm, to offer a joint algo trading framework supported within a Microsoft .NET framework. The goal is to make the implementation of algorithmic trading applications easier for customers.
Coral8 also launched a partnership with Wombat Financial Software at the end of last year to embed the Coral8 engine into Wombat’s high-speed market data infrastructure. Wombat’s infrastructure includes market data feed handlers, a messaging platform that transmits data between systems and applications, and integration tools. The aim of the product, called Wombat Acumen, is to push microseconds of latency out of the algorithmic development and calculation process.
Perhaps the most extensive integrated offering comes from Hewlett-Packard, Intel, Voltaire and Reuters. The four firms, some of which have joined forces in the past, have now banded together to provide financial-services firms with an optimized hardware and software “configuration” for advanced, low-latency algorithmic trading.
The joint offering enables customers to install a comprehensive solution without having to pick and choose the various components and ensure that they work together seamlessly. The configuration being shopped by these firms uses the Reuters Market Data System and Reuters Tick Capture Engine installed on HP BladeSystem c-Class server blades. The blades are powered by Intel’s Xeon processors and Voltaire’s Grid Director InfiniBand switches. InfiniBand is a network technology for high-performance computing that provides increased throughput and lower latency than alternatives such as Ethernet.
Exegy, a software provider with an application-level ticker plant for trading, showcased a hardware-accelerated ticker plant utilizing dynamically reconfigurable coprocessor modules from vendor DRC Computer Corp. The Exegy ticker plant is used for basket calculations and index arbitrage, and can be utilized for options trading. Exegy execs say they already have a handful of hedge fund clients and five large investment banks using the system.
21 Club
With customers pulling out the stops to suppress latency wherever it resides, one concern is the development of a quasi arms race in which trading desks are shaving microseconds off processes to compete more aggressively against one another.
Exegy has turned this notion into a business model by committing itself to exclusivity via a “21 club.” Execs say the firm will stop selling its hardware-accelerated ticker plant application once it has 21 customers. After that, it will build low-latency products for other aspects of the trading cycle.
But perhaps a sign of these low-latency times is the entry of a firm like Real-Time Innovations into the financial arena. RTI started out in 1991 with high-performance networking middleware solutions in the aerospace and military sectors, and then branched into transportation and other industries. It ventured into the financial sector a year ago.
The initial technology behind RTI was developed at the Stanford University Aeronautics Laboratory to enable subsystems within robots and other complex equipment to communicate. “In areas like robotics and industrial automation, where you’re controlling physical processes, microsecond-level guaranteed response times are required,” said David Barnett, vice president for product management at RTI.
New Markets
Now, with the explosion in automated trading, RTI can apply its high-performance middleware, called the RTI Data Distribution Service, to a new market. The firm recently inked partnerships with Coral8 and software firm InfoDyne. RTI is embedding Coral8’s CEP engine into a product it’s currently working on for the finance and aerospace and defense sectors. RTI has also integrated its middleware into InfoDyne’s ticker plant offering as a turnkey solution.
Barnett says RTI has several financial-services customers and a number of active evaluations going. One client is proprietary trading firm Automated Trading Desk, which Citi is in the process of acquiring. ATD signed on to use RTI’s middleware for options market making earlier this year, with the expectation that it would be implemented for equities as well. ATD has since decided not to make markets in options, but an ATD spokesperson said the firm still intends to roll out RTI’s low-latency middleware for equities. The final decision, however, is on hold until after the Citi acquisition closes in the third quarter.
Vhayu Technologies, a provider of tick processing and persistence software for financial firms, said it may be adding some market-making firms to its growing roster of clients, which include Bear Stearns, Nomura, Thomas Weisel Partners and ABN Amro. Vhayu’s platform enables firms to capture and analyze streaming and historical market data.
Several market-maker firms are apparently looking at Vhayu Velocity to replace their existing systems, according to a Vhayu exec at the tech show. Separately, ABN Amro in June announced it would use Velocity to provide real-time and historical volume-weighted-average-price calculations for European equities.
Messaging Performance
On the messaging software front, young upstart companies are getting more aggressive as they go up against messaging giant Tibco. Tibco’s Enterprise Message Service and Rendezvous products provide companies with powerful messaging platforms that enable data to flow seamlessly across disparate IT systems and communications protocols for simultaneous use in multiple applications.
29West, a provider of high-speed messaging software whose products are deployed in about 100 financial firms, received a private equity investment from Susquehanna Growth Equity, an affiliate of Susquehanna Investment Group, in March. The firm offers speed-sensitive customers persistent messaging and delivery confirmation for high-performance applications, as well as a low-latency messaging product. 29West used some of the equity proceeds to open a London office.
Three-year-old Tervela is a relative newcomer competing with 29West. Its hardware-based data messaging makes it unnecessary for data to “traverse a software stack,” said sales exec Jon Flynn. He noted that six of the top 10 Wall Street firms use Tervela’s messaging platform. The firm’s funding comes from Goldman Sachs, Sigma Partners and Acartha Group.
Wombat, an aggressive market data infrastructure provider that has made deep inroads into investment banks and brokerage firms, also recently announced a new low-latency messaging platform within Wombat Platform, called Wombat Data Fabric. The technology uses Voltaire’s InfiniBand-based switches.
