1. Architectures for Disparate Derivative Trading and Settlement Paul Pickup Strategic IT Consultant Trading Technology www.tradingtechnology.com Andy Schneider BJSS www.bjss.co.uk

2. © Catalyst Development Ltd 2002 AGENDA Introductions Business drivers affecting derivative trading Challenges faced by IT Service orientated architecture Case studies Summary & Questions

3. © Catalyst Development Ltd 2002 Trading Technology Note – Not Trading Technologies!!! Specialists in Trading Systems Consultancy, not development People are the challenge, not the technology Business analysis Program and Project Management IT Marketing and Research www.tradingtechnology.com

4. © Catalyst Development Ltd 2002 BJSS Ltd. The highest quality software engineers Bespoke development only Financial services – especially trading environments Messaging and high-availability transactional environments Significant clients including the London Stock Exchange, LIFFE, CREST, Reuters, BP www.BJSS.com

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6. Business Drivers Recent survey of Stock Exchange Technology Through FOW Conclusions cash trading high-volume low value Traders Market Expansion into derivative instruments IP-based technology enabler

7. © Catalyst Development Ltd 2002 Business Drivers Derivative business lines FX and Money derivatives Credit Derivatives OTC Derivatives Spread betting Commodities Energy Weather….

8. © Catalyst Development Ltd 2002 Demands on systems Derivative traders are only as good as their IT! Programmer/Mathematician/ Derivative trader hybrid Many small-point systems Developed by traders Excel Access Visual Basic

9. © Catalyst Development Ltd 2002 Demands on systems Demands of traders Time to market Profit window Uncertain Revenues Need for secrecy Demands of IT oPlanning oBudget oResourcing oShared knowledge oInfrastructure oNeed for control oSupportability oCentralisation

10. © Catalyst Development Ltd 2002 Business Drivers – The Problem The problem is either:Or: STATE CONTROLLED CENTRALISATION

11. © Catalyst Development Ltd 2002 Business Drivers – The Problem The best of each world is:Or: STATE CONTROLLED CENTRALISATION Flexibility Speed of development Low cost RAD approach Disposable systems? Ability to plan Clear agreed requirements Budgets Maintainability Supportability Fits in with other systems Common development techniques

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13. Delicate balancing. One size does not fit all. Predictable Dynamic Tactical Strategic Flex Standards Small Scale Large Scale The Balancing Act

14. © Catalyst Development Ltd 2002 Key Design Principles Complex Trade Offs... Cost Of Entry Enable Buy & Build Scaleable Support Diversity Zero LatencyB2B Ready Linear Cost Incremental Availability Business Process Support

15. © Catalyst Development Ltd 2002 Service Orientated Architecture Abstract Interfaces to Business Processes. Leverage Existing Systems. Ease integration of large systems (e.g. SAP). Heterogeneous environments. XML, simple protocols. SOA is not web services, SOA is a design philosophy. Services are not just Web Services......SOA is a software architecture that starts with an interface definition and builds the entire application topology as a topology of interfaces, interface implementations and interface calls... [Natis, Gartner 2003]

16. © Catalyst Development Ltd 2002 Messaging and Services Deal Entry Pricing ReportingExposure Plain Text (XML) Message Bus Leverage mature message based architectures... Workflow Transformation Sequencing Human Intervention Core Component API Reference Data Repository Reference Data

17. © Catalyst Development Ltd 2002 Bus or Hub/Spoke. Federated. Point-to-point or Publish & Subscribe. Asynchronous or Request/Response. Variable QoS. Messaging Options... or combinations and variations of...

18. © Catalyst Development Ltd 2002 Transaction Transaction Options Transaction Process & Database Update Publish Message or Request Process & Database Update Receive Message or Request Publish Message or Response

19. © Catalyst Development Ltd 2002 Other Considerations Security Control Costs With Threat Model Authentication Integrity Privacy Business Continuity Availability Disaster Recovery

20. © Catalyst Development Ltd 2002 Ontologies Top Level Business Unit Core Java Apps SAP Instance Communication Medium Define globally, adapt locally

21. © Catalyst Development Ltd 2002 Reference Architecture Process Automation WorkflowRules Engine Application Services PersistenceSecurity Data AccessAPI Deployment Services Load BalancingClustering Deployment Administration Integration TransformationTranslation MessagingRouting RecoveryFail Over Reference Data Meta DataMaster Data Monitoring Event BusMonitoring Audit/HistoryCaching The Enterprise Service Bus makes much of this available…

22. © Catalyst Development Ltd 2002 Case Study: Energy Trading & Scheduling System Paper Deals Options, Futures,.... Physical Deals Scheduling Contract Generation Many Legacy Systems

23. © Catalyst Development Ltd 2002 XML on TIBCO Certified Messaging Scheduling Solaris J2EE ORACLE VMS ProIV Back Office Case Study: System Evolution Win2k COTS SQL Server Contracts Excel VBA Reference Data Mappings in Transformation Engine Core Component API Reference Data Repository Reference Data Solaris J2EE Workflow Transformation Sequencing Human Intervention Solaris TIBCO IM ORACLE Deal Entry Solaris J2EE Transaction Boundary

24. © Catalyst Development Ltd 2002 Inextricably Entwined Architecture Technology Method Process Process and Architecture: entwined and generative

25. © Catalyst Development Ltd 2002 21st Century Development There is no grand narrative. Right people, right process, right time. Method-per-project with agile philosophy. DSDM XP SCRUM RUP Waterfall Iterative Spiral Crystal JAD FDD TSP Method to fit goals

26. © Catalyst Development Ltd 2002 Industrial Strength Agility Iterative, adaptive, embracing change. Execute Measure Adapt Deliver Tailor Finding Best Fit Completion Commitment Project & Programme Governance }

27. © Catalyst Development Ltd 2002 Case Study: Balance Agility and Governance Before: Large multi-national. Waterfall style governance. Chaotic, disconnected development. After, process aimed at: Optimising test and quality. Improve transparency control. Improve fit with governance.

28. © Catalyst Development Ltd 2002 Case Study: Multi-Disciplinary Teams Smooth resource usage. Optimise for information flow. Small, efficient feedback loops. Functional Delivery People are key, have first order effect. Analysis Team A Development Test Best Practices Standards Quality Monitoring

29. © Catalyst Development Ltd 2002 Case Study: Transparency Daily Defects - component based. Defect State of Nation. Graphs to programme team and on wall. Monitored trends to ensure closure. Progress Planned, actuals EVA, variance and velocity. Agreed iteration exit criteria. Transparency = Trust, Benchmarking, Clear Progress

30. © Catalyst Development Ltd 2002 Case Study: Automate, automate... Test Phase Tool Support Check-In Build Cruise Control NightlyEnd of iteration test.Responsible Unit Tests xUnit Robot Dev Link Tests xUnit Robot Dev Tech Tests Load Runner Dev/Tech Test System Tests Robot People Test Team Integration tests xUnit Robot People Test Team Continual integration and test build quality

31. © Catalyst Development Ltd 2002 Case Study: Necessary & Sufficient Design and Analysis is both an activity and communication. Documentation is not an end in itself. Focus on: Necessary: Has a clear purpose. Sufficient: Good enough for the purpose. Right level of detail. Necessary and sufficient - minimum needed...

32. © Catalyst Development Ltd 2002 Case Study: Adapt Iteration reviews. Project Teams are Self Optimising. Holistic Analysis - Entire process chain. Adapt to functional change. Multi skilled teams maximise flexibility. Improved Throughput with Skilled Self Optimising Teams

33. © Catalyst Development Ltd 2002 Case Study: Governance on top Agile Underneath AppraiseSelectDefineExecuteOperate Business Modeling Requirements Analysis & Design Implementation Test Deployment Config & Change Management Project Management Environment

34. © Catalyst Development Ltd 2002 The Death Of Technology Led Solutions SOA and Enterprise strength agile - Business Orientated. No longer technology orientated. Heterogenous methods and systems enabling each other. Incremental, Scaleable, Manageable. Team Orientated. Links and resources: http://www.bjss.co.uk/fow

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36. Summary Derivatives increasingly important and profitable Increasingly disparate Business needs force flexibility Balance between federal and centralized control Requires common development methods Needs strong accreditation throughout the organization Part of your core competence Not to be outsourced!

37. Questions Paul Pickup Strategic IT Consultant Trading Technology www.tradingtechnology.com Andy Schneider BJSS www.bjss.co.uk