Managing Data in Tumultuous Times
Technology options abound for firms coping with surging volumes
November 3, 2008
Confronted with the credit crunch and fragmenting liquidity, data management personnel are struggling with capacity constraints, latency and quality issues. And while financial firms are tapping a variety of tools to handle the increased demands, their goal is the same: calculating risk exposures and making decisions in record time.
Software and service providers have been capitalizing on the industry's needs. On Oct. 27, Thomson Reuters unveiled a hosted, low-latency solution for the U.S. Options Reporting Authority (Opra) data feed, while Eagle Investment Systems, a subsidiary of Bank of New York Mellon Corp., said the market turmoil has sparked increased interest in its centralized data warehouse.
Two weeks earlier, complex event processing (CEP) technology provider StreamBase Systems said its platform had been installed by agency brokerage BNY ConvergEx Group for electronic trading operations. Progress Software Corp.'s Apama division followed with the release of a CEP framework that offers real-time risk management capabilities. Meanwhile, Exegy, a St. Louis-based consolidator of market data feeds, has launched a Web site--MarketDataPeaks.com--in conjunction with the Financial Information Forum to help brokerages, market centers and vendors cope with capacity planning.
The flurry of announcements has arrived as trading volumes reach all-time highs. On Sept. 15, when Lehman Brothers filed for bankruptcy and Bank of America Corp. said it had reached an agreement to acquire Merrill Lynch & Co., the Dow Jones dropped 500 points while the update rates for U.S. equities and options venues reached 990,800 messages per second. By midday Sept. 16 that number climbed to 1.83 million.
"Next year, we'll say that 2 million messages per second isn't that bad. By then it will be 10 million," predicted John Partridge, VP and co-founder of Lexington, Mass.-based StreamBase, at a recent Interactive Data Corp. conference in New York. "Customers want to have access to multiple alternative trading systems, including dark pools, and quants are competing with each other." There are over 70 alternative trading systems currently in operation, about half of which are dark liquidity pools.
The Rise of Low Latency
With microseconds of delay often marking the difference between million-dollar profits and losses, 90 percent of broker-dealers, 75 percent of hedge funds and 17 percent of investment managers are using low-latency data, according to Tabb Group. Hedge funds and asset managers will spend $305 million on low-latency options infrastructure in 2011, estimates the New York-based research firm, up from $253 million this year. "IT vendors who can understand their clients' needs, and traders who can understand where reduced latency can enhance profits, will ultimately gain," noted Andy Nybo, senior analyst at Tabb Group.
Thomson Reuters says its low-latency solution delivers direct, high-performance Opra market data via its new Reuters Hosting Solutions facility in Nutley, N.J. The data center receives the Opra feed through BT Global Financial Services' Radianz Ultra Access service in sub-milliseconds. Because the hardware and systems are fully managed at the hosting center, customers have few if any infrastructure needs.
"Algorithmic and programmatic trading systems require access to full-tick, low-latency Opra data through a scalable service that can handle not only today's 3 billion-plus messages per day but also tomorrow's projected growth rates," said Bill Ruvo, global business manager for real-time feeds at Thomson Reuters. The offering also supports separate regional and national best bid and offer quotes, allowing customers to restrict their subscription to the content they want. Clients can collocate their applications at the data facility for access to the full Opra feed.
