Proactive Alerting and the Demise of Decision Latency

Traders, compliance officers, risk analysts and quants all work at the coal face, where pressure for accuracy and insights is greatest. They and their managers are directly responsible for the profitability of their operations, and improving their alerting capabilities in the midst of exploding data volumes is critical to increasing ever thin margins.

Firms continue to expand their data gathering and analytics strategies to drive more accurate and timely decisions. But while this ever-expanding data universe helps augment the decision-making process, it can also make it difficult to make sense of what we are seeing. In trading operations, speed is everything, and if traders cant understand the data to draw insights quickly, all the value of their analytics investments goes out the window. It is this decision latency and the ability to remove it that separates the most successful traders from the rest.

Technology solutions have focused on helping traders quickly comprehend data for the past 20+ years. Now real-time streaming analytics helps traders spot the anomalies, see trends, and identify outliers in mere seconds. Whether its profitability analysis, compliance, or risk mitigation, traders are able to take a highly granular look at data, down to the nanosecond, to understand the casual links between events.

New proactive alerting tools enable traders and analysts to design and build alerts for any number of metrics utilizing multiple real-time and historic data sources. The systems ability to instantly notify a user of an anomaly allows that user to immediately investigate and take corrective action without having to constantly monitor trading flow. Additionally, traders and analysts no longer have to rely on IT to configure customized alerts, further accelerating their speed to insights.

Through these automatic alerts traders and analysts are notified about possible compliance violations. Further, traders and compliance people can design and implement alerts based on any number of metrics culled from multiple real-time and historic data sources, and they can do it on their own, without help from IT.

Always be Vigilant

When examining risk mitigation, banks are already realizing the value of proactive alerting. Concerns over spoofing, quote stuffing, wash trades and MiDFID II breaches are among the litany of compliance violations that can are being identified and corrected in real time. And within the context of the order book, traders are also able to investigate suspicious trades and trading activity, down to the specific trader if needed.

With speed and accuracy being paramount to success, many traditional methods of anomaly detection such as external audits and data sampling are lackluster. Not only are they reactive, they only highlight very small portions of the data sets youre working with. Traders, analysts, and managers need to find compliance needles in the haystack quickly; they also need to find the diamonds in the rough. Real-time analytics with proactive alerting will help the user formulate a better, immediate, and actionable picture of what the data is really saying. This technology makes it easy to reveal patterns that were previously too difficult (or near impossible) to detect in real time. In fact, the Securities and Exchange Commission has been deploying similar technologies to help detect even the smallest infractions for two years.

Finding the Diamonds in The Snow

Traders benefit from the accuracy of quantitative models for predicting outcomes of particular events, leading to more confident and quicker decisions for their customers. Yet, it can still be difficult to sift through high volumes of data and find specific patterns without full visualization of the data, including both real-time and historical data sources. Proactive alerting, where users can select a set of variables and program alerts based on the status of those variables helps narrow the scope of analysis to anomalies that traders and compliance officers can address immediately. For example, a user can trigger an alert when their Hit Ratio for a particular client falls below 25 percent for longer than 10 seconds. Or, they can establish an alert that will notify when combined risk across multiple portfolios exceeds limits for longer than a minute.

Self-Service Is the Future

Sophisticated self-service analytics tools integrated with a visualization platform offers traders more insights into their data, including occurrences or irregularities that could cause for immediate concern. This allows them to take instant action without the need to constantly monitor trading flow. Additionally, mobile notifications help to keeps traders informed while away from their desks. Their ability to connect to data sources, or design ad hoc applications and dashboards in response to market events without writing a single line of code is also key to identifying opportunities before theyre gone.

While the ability to build queries via code has been around for quite some time, toolsets like proactive alerting enable traders to customize alerts from a series of dropdown menus without any coding experience required. It serves to help democratize data analysis within the firm. Removing IT-related bottlenecks helps speed remediation of compliance issues and improve the firms ability to take better advantage of fleeting opportunities. With traders looking for every advantage they can find, speed is the name of the game.

Alan Gardiner is Global Account Manager at Altair Panopticon