Complex Event Processing
Amid IT Cuts, CEP Playing Growing Role, Says Apama's Bates | Reacting to Risk: Firms Adopting CEP for Real-Time Monitoring
Amid IT Cuts, CEP Playing Growing Role, Says Apama's Bates
May 4, 2009
While the economic crisis is fostering a cautious approach to IT spending, financial firms face competitive pressures to invest in areas such as risk management and systems that can handle rising volumes of market data. Complex event processing (CEP) technology, with its ability to sift rapidly through large quantities of information, can help in both regards, notes John Bates, general manager of Progress Software Corp.'s Apama division.
Amid tightening budgets, spending on CEP technology will grow by more than 50 percent annually for the next five years, estimates research firm IDC. And vendors like Apama have been working to bring the technology to smaller firms by introducing hosted applications that reduce the costs of implementation, development and maintenance.
Bates, who has a PhD from Cambridge in mobile and distributed computing, is an event processing pioneer, co-founding Apama in 1999 and serving as its president and CTO until Bedford, Mass.-based Progress acquired the company in 2005. Securities Industry News recently spoke with Bates about CEP's role in real-time risk management and the technology's future.
What are some of the usage trends you're seeing with CEP technology?
One of the major areas of focus is real-time risk management. While many financial service customers have been utilizing CEP technology for some time now for risk purposes, many have ramped up their focus on employing the technology, based on the growing interest in improving risk management efforts.
Some of the risk exposures that were not detected by firms early on were based on their technological approaches. With so much volatility during the day, firms absolutely need to have a millisecond-by-millisecond view of their exposure, and not just for one trade but real-time profit-and-loss and risk exposure for the whole desk and the entire institution on a cross-asset-class basis. This is what complex event processing technology can help firms do.
Are you saying that complex event processing could have prevented the financial crisis?
I won't say that CEP is the savior of all our financial industry problems. However, it is one part of what we need to do to ensure better and more real-time risk management.
There is also a need for organizational changes at larger firms to ensure better risk management practices. While real-time risk management is an approach we've seen being used over the past three or four years in pockets at firms, it is not something that has been embraced on an organizational basis. It has, however, been embraced by many trading groups--they have certainly seen the need to utilize CEP as they move into high-frequency trading modes, and they know that they must have risk systems prepared for the consequences of high-frequency trading. In fact, that was why we released our capital markets framework and new risk firewall capabilities last year.
What companies have you been collaborating with on risk?
We work closely with firms such as Kx Systems, a provider of analytic databases, and Vhayu Technologies, a provider of tick data solutions, to help financial firms do proper back-testing and analysis of all the data they need to review. And we also work alongside real-time modeling firms and allow you to transfer data from CEP into their models.