Apama, Detica Partnership Produces Market Surveillance Platform
April 22, 2008
Technology consultancy Detica Group and Progress Software Corp.’s Apama division have partnered on a real-time surveillance platform for exchanges, alternative trading systems and financial services firms’ trading desks.
The system--Detica Market Surveillance Accelator--which the companies say will help institutions identify suspect trading practices, launched today and is designed to be used in concert with London-based Detica’s consulting services. Detica and complex event processing (CEP) technology provider Apama announced in January that they are providing a solution to U.K. multilateral trading facility Turquoise to monitor and analyze trade-related data for potentially problematic patterns. They have also provided a surveillance platform to the U.K.’s Financial Services Authority (FSA).
“This partnership combines our knowledge of market behavior and the Apama platform in a way that can deliver market confidence,” said Simon Asplen-Taylor, head of Detica’s market and regulatory services group. He cited the ability to analyze events in real time and preempt market abuses such as front-running as key factors in building and sustaining market confidence.
“Recent events are ample testimony to the need to be vigilant in monitoring trading activities,” said John Bates, founder and general manager of the Apama unit of Bedford, Mass.-based Progress. “Failure to quickly detect suspicious behavior will risk wreaking havoc in the markets, impair market confidence and injure firm reputations.”
Giles Nelson, director of technology at Apama, pointed to the rogue trading incident at Société Générale, which resulted in a net loss of about $7.5 billion for the bank, and the recent unauthorized trading at New York-based brokerage firm MF Global. A single trader’s activity--causing MF Global to lose $141.5 million--went undetected, Nelson asserted, because the firm shut down its surveillance system after it slowed down daily trading operations.
“Today, firms are looking for a trading surveillance system that will behave both in a non-intrusive and real-time way,” Nelson said.
According to Nelson, the new platform is based on experience Detica and Apama gained in developing the surveillance systems for the FSA and Turquoise, which is backed by nine investment banks and expected to begin operations in September. “Our customers will benefit from our experience and will be saving months in development time,” he added.
Combining Detica analytics, data source adaptors and out-of-the-box scenarios with CEP technology from Apama, Market Surveillance Accelator can identify, for example, trades that don’t involve a change of beneficial ownership, “painting the tape”--transactions intended to give the impression of price movement--and attempts to drive prices up or down to profit or avoid a loss, say the companies.
Available for a base cost of $100,000, the platform can be customized to address new or changing suspicious activities and scaled up in response to major increases in volumes. “You can change and customize the out-of-box scenarios we have provided,” said Nelson, adding that customers will include both regulators and brokers. The system utilizes an Eclipse-based development environment and can be customized using Apama’s proprietary CEP scripting language or Java.
Nelson described the offering as a powerful telescope: “You begin to see things that you didn’t know were there and you are able to have a better handle on them.” Competition comes from surveillance systems built by in-house development teams, he added.
“There’s absolutely a need for these new types of real-time surveillance and management systems,” said Matt Samelson, senior analyst at Boston-based research firm Aite Group. However, he noted, it is hard for trading desks to justify such a purchase when their goal is to make money--many prefer to spend their IT dollars on revenue-generating systems. “Unfortunately, I think we are going to have to see more disasters and more problems to motivate firms to actually take the step to put these new surveillance systems in place,” he said.
