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Progress Apama – Complex Event Processing for the Financial Markets Alexander Sirotin Director of Sales. CIS, CEE Region Apama Capital Markets 11 November.

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Presentation on theme: "Progress Apama – Complex Event Processing for the Financial Markets Alexander Sirotin Director of Sales. CIS, CEE Region Apama Capital Markets 11 November."— Presentation transcript:

1 Progress Apama – Complex Event Processing for the Financial Markets Alexander Sirotin Director of Sales. CIS, CEE Region Apama Capital Markets 11 November 2009

2 © 2009 Progress Software Corporation2 Business Velocity Is Key to Efficiency STP, zero-latency enterprise Reduce processing time Reduce processing time Design Strategy Business Requirement Typical Business SLAs 10 6 10 5 10 4 10 3 100 10 1 0 Seconds mail express fax e-mail Document transfer Algorithmic trading 100 ms20 ms Call center inquiries 8 hr 10 sec Supply chain updates 1 day 15 min Phone activation 1 min 3 days 1 week0.5 hour Refresh data warehouse Track financial position 5 min1 day Airline operations 20 min 30 sec Trade settlement 5 days2 hrs. Build-to-order PC 4 weeks1 day

3 © 2009 Progress Software Corporation3 ►The velocity of information is not keeping up with the speed of business We’re told that information is not timely enough Survey of 500 European Business and IT Leaders Source: Vanson Bourne Research, 2008 ► 83% believe IT has a major influence on the ability of businesses to adapt and change ► 77% believe availability and timeliness of information is inadequate to support this change

4 © 2009 Progress Software Corporation4 Conventional Ways of Examining Business Information Always looking in the rear view mirror How can I examine what is happening and react now?

5 © 2009 Progress Software Corporation5 Market Leadership “Progress Apama earned high marks for its event processing features, its development tools, and it business end-user tools, propelling it into its position as a Leader.” The Forrester Wave™: Complex Event Processing (CEP) Platforms, Q3 2009  Industry Recognition: The Forrester Wave™ Leadership in architecture, features, market presence and strategy

6 © 2009 Progress Software Corporation6 CEP Market Size  Now: $141M globally  2012: $803M Compound Annual Growth of 55% Apama is a Leader in CEP From IDC report: “Complex Event Processing Opportunity Analysis and Assessment of Key Products”, February 2009

7 Trends in the Financial Sector

8 © 2009 Progress Software Corporation8 Equity data rates have been increasing Source: World Federation of Stock Exchanges Total number of equity trades

9 © 2009 Progress Software Corporation9 Equity data rates have been increasing Source: World Federation of Stock Exchanges

10 © 2009 Progress Software Corporation10 Derivatives data rates are exploding Source: OPRA

11 © 2009 Progress Software Corporation11 Derivatives data rates are exploding Source: Euronext Liffe

12 © 2009 Progress Software Corporation12 In general Trading volumes Order sizes + = Data!

13 © 2009 Progress Software Corporation13 Algorithmic trading is now everywhere

14 © 2009 Progress Software Corporation14 Algorithmic Trading – What & Why  Automated trading  When to trade Objective: seek alpha Continuously re-calculate analytics Monitor thresholds/rules –Stat arb –Spread –Index arb  How to trade Objective: best execution Order execution policy –Slice up orders (wave trade) –Route across liquidity pools (smart order routing) –In market limit + timeouts –Out of market limits (“electronic eye”) Calculate 10 minute moving average Calculate 5 minute moving average Monitor for moving averages crossing Wave trade order over next 2 hours based on historic volume profile Route child order to liquidity pool with best price

15 © 2009 Progress Software Corporation15 ALL WITHIN any 2 minute time period time real-time data streams ! AND ( HPQ’s price moves up by 5% ! WHEN MSFT price moves outside 2% of MSFT Moving Average ! OR MSFT’s price moves down by 2% ) ! FOLLOWED-BY ( My Basket moves up by 0.5% THEN BUY MSFT SELL HPQ NASDAQ NYSE MSFT Moving Average My Basket complex event sequences High Frequency Trading Rule multiple data streams real-time constraints automated actions temporal sequencing

16 Apama The offering What our customers are doing

17 © 2009 Progress Software Corporation17 Apama Clients in Capital Markets include:

18 © 2009 Progress Software Corporation18 Algorithmic Trading Alpha Seeking & Execution VWAP, TWAP, etc Multi-Asset, Cross Asset Buy Side, Sell Side, Prop Trading Algorithmic Trading Market Making & Aggregation Liquidity Discovery Market Making Smart Order Routing & Execution Auto Hedging FX Aggregation Surveillance Compliance Risk Management Market Abuse Detection Market Maker Monitoring Op Risk, Business Control Risk Firewall, Auto Hedging Market Surveillance Best Execution Smart Order Routing Aggregated Execution Compliance Smart Order Routing Market Making & Pricing Intelligent Pricing, Skewing, Tiering Market Making Real-Time Pricing ApplicationsExamples Solution Accelerators Customers Major Tier 1 Bank Global Tier 1 Bank Key Applications

19 © 2009 Progress Software Corporation19 Business & IT Tools - Apama Workbench Dashboard BuilderCode-based Development Graphical Development Event Modeler Real-time, Event-based Platform for Building Applications Inputs  Market data  Orders  Any event Alpha-seeking & execution rules:  Crossover  Momentum trading  Statistical arbitrage  Index arbitrage  Iceberg  VWAP  Market participation  Order slicing ...and more… Actions/Output  Orders  Derived data  Dashboard interaction

20 © 2009 Progress Software Corporation20 Solution Accelerators Capital Markets Framework 50+ Market & Infrastructure Adapters Algorithmic Trading Market Surveillance FX Aggregator Smart Order Router... Apama CEP Platform Real-time Pricing … Sub-Systems & Components Risk Firewall Market Data Trade Services Position Services Order Book Order Mgmt Status Utilities … Apama Solution Accelerators

21 © 2009 Progress Software Corporation21 Algorithmic trading accelerator  Algorithms Alpha-seeking & Execution Cross-asset support Backtesting facility  Strategy Design Business & IT Tools  Dashboards Pre-built Customizable  Integrated CMF Components Exchange simulator Risk & position management Trader P&L  Broad Connectivity Market Data & Execution Infrastructure Customizable

22 © 2009 Progress Software Corporation22

23 © 2009 Progress Software Corporation23 Anatomy of the VWAP algorithm

24 © 2009 Progress Software Corporation24

25 © 2009 Progress Software Corporation25 Apama Connectivity Market Data Reuters Activ Financial Dow Jones Elementized News Feed KOSPI (Korean Composite Stock Price Index) Nexa Tickstream Wombat Lime Brokerage (Citrius) Equities Markets Market Data Market Data sources (listed above) Bovespa Other direct connectivity 2 Order Execution FIX 4.0 – 4.4 Bovespa EMS/OMS/FIX Gateways (listed right) Direct Bank/Broker Connectivity (listed below) Other direct connectivity 3 Analytics MATLAB Quantlib (select functions) Intel Math Library (select functions) CQG Direct Foreign Exchange Markets EBS Spot Ai Hotspot FX Currenex FXall Accelor Lava FX – Spot FX Reuters Dealing 3000 BGC Direct Futures & Options Markets Euronext.Liffe Intercontinental Exchange (ICE) Chicago Mercantile Exchange (CME/NYMEX) Eurex ELX BM&F Direct Bank Connectivity Barclays Deutsche Bank Autobahn UBS Goldman Sachs ITG Penson Brokerbox Lime Brokerage Morgan Stanely Direct Fixed Income Markets ICAP Brokertec BGC (eSpeed) Tick Databases Vhayu/Reuters Tick Capture Engine KX Systems kdb+ EMS/OMS/FIX Gateways Transact Tools Aegis Gateway (Athena Trader) Ulbridge (Odisys) GL Trade Cameron Trading Technologies (TT) Pro Nexa Fastpath IRESS CQG FlexTrade Fidessa Infrastructure Adapters JMS JDBC ODBC Sonic Tibco Rendezvous Tibco Talarian Sonic 1. If a source or destination is not shown, please inquire with your Apama representative as to its status, as new adapters are always being built and can be built as required. 2. Direct connectivity can be provided as an alternative to market data sources listed 3. The Apama FIX adapter can be configured for direct connectivity to any FIX destination

26 © 2009 Progress Software Corporation26  Exchange collocation – enables competition in: Cross-geography Speed/latency  Software-as-a-Service Quick time to market Minimal investment  Hosted Easy access Optional connectivity to any other trading venues and market data sources  Apama Examples CQG – Automated execution for commodity & FX futures BGC – Algorithmic trading for Fixed Income cash & futures FFastFill – Automated futures spread trading & global exchange collocation Trading in the Cloud Algorithmic Trading Cross-asset class Speed/latency advantage Rapid customization Cross- geography

27 © 2009 Progress Software Corporation27 CQG and Progress partnership

28 © 2009 Progress Software Corporation28 Building and Deploying an Apama Application Middleware DBMS Point Systems Integration Other… Adapters connect the event processing engine to the IT environment. Pre-packaged adapters can be dynamically deployed, configured, and modified. New adapters can be built quickly

29 © 2009 Progress Software Corporation29 Smart Block Analytics Building and Deploying an Apama Application Middleware DBMS Point Systems Integration Other… CEP Smart Blocks encapsulate common analytics and domain specific functionality (for example, libraries of statistical analytics)

30 © 2009 Progress Software Corporation30 Smart Block Analytics Building and Deploying an Apama Application Middleware DBMS Point Systems Integration Other… Scenario modelling Event based scenarios can be modelled using a GUI tool. Business analysts can develop, configure and deploy scenarios themselves Event based scenarios can be modelled using a GUI tool. Business analysts can develop, configure and deploy scenarios themselves

31 © 2009 Progress Software Corporation31 Smart Block Analytics Building and Deploying an Apama Application Middleware Database Point Systems Integration Other… Customers & partners End-User Dashboards Scenario modelling

32 © 2009 Progress Software Corporation32 What to do About it Now: Use O wn Automated IP for differentiation  Fears of the Black Box If everyone has the same algo then the competitive advantage is reduced Limited scope to use your skills – can only parameterise  Markets are continually evolving with new opportunities emerging  Need to develop new strategies fast Spot opportunity Design strategy Backtest and deploy  Customization is now king If everyone has the same black boxes: no competitive advantage Leverage own intellectual property for competitive differentiation Custom “rules-based” trading is becoming critical

33 © 2009 Progress Software Corporation33 APAMA PLATFORM at BROKERAGE Apama Connectivity MARKET DATA AND EXCHANGES User Front Ends Prop Trader Security and Compliance Staff ECNS Exchanges Market Data Vendors

34 FSA Surveillance Case Study

35 © 2009 Progress Software Corporation35 All Participants Are Interested In Surveillance and Monitoring Broker Trading Venue (Exchange, ECN etc.) Regulator Orders (proprietary and client) Surveillance and Monitoring Surveillance and Monitoring

36 © 2009 Progress Software Corporation36 Proscribed scenarios e.g. front running, fictitious orders, painting the tape etc Liquidity and spread monitoring, associated market halts, price /volume spikes, abnormal concentrations Throughput, competitiveness, movements from normal behaviour Both sides of book (efficient internal matching), rogue algorithms, best execution, internal controls and limits Market Abuse Surveillance Market Monitoring Operational Monitoring Management & Control What Needs To Be Done - The 4 Facets Of Monitoring

37 © 2009 Progress Software Corporation37 The Business Driver of FSA’s Sabre II The FSA are concerned that market abuse continues to be a significant issue. For example, FSA researchers have detected price movements, suggesting “informed trading” may have taken place prior to 28.9% of takeover announcements and 21.7% of the FTSE350 trading announcements, and which were identified as being most likely to contain information of use to an insider trader. Sally Dewar Director of Markets Division, FSA May 2006 Speech

38 © 2009 Progress Software Corporation38 SABRE II Requirements  Process Information in Motion! Market events, news events, multiple sources of events, multiple exchanges  Easy To Use, User Friendly System Graphical display of complex data relationships (web and thick-client) Tools that are easy to use and easy to configure  Intuitive Alert Programming Language Well developed mature programming language Powerful multi-exchange and multi-instrument type language features Truly integrated alerting across all combinations of integrated data  Satisfy MiFID Requirements MiFID data feed acquisition MiFID policy calculations & reports MiFID inter-regulatory reporting

39 © 2009 Progress Software Corporation39 Usage Model at FSA Integrated RAD environment Develop dashboards IT and data analysts Develop market connectivity Monitor alerts Monitor companies Alert analysts & company monitoring Manage alerts Market conduct teams and “Super users” Deep historical analysis Create and evolve alert rules Fully integrated, rapid development environment

40 © 2009 Progress Software Corporation40 The SABRE II Architecture A next-generation, world-class market surveillance and market abuse detection platform Apama LSE Adapter Alert rule Instances Market conduct teams, alert analysts, etc. Historical abuse patterns Business Intelligence Historical abuse analysis LSE Abuse detection scenarios virt-x Adapter

41 © 2009 Progress Software Corporation41 Example: Fraud Detection The UK Financial Services Authority

42 Conclusions

43 © 2009 Progress Software Corporation43 An event driven market surveillance architecture Complex Event Processing Historical abuse analysis Market conduct teams, alert analysts, etc. Market data Abuse detection scenarios Social Networking Rule definition and refinement Replay and root-cause analysis

44 © 2009 Progress Software Corporation44

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