The Event Processing Blog

An Apama Hat Trick

Last week proved to be a busy one for Apama on the marketing front as we issued three separate announcements in conjunction with our presence at the TradeTech show in Paris.  Two of the announcements focused on customers, while the third focused on work that a partner is jointly doing with Apama in the area of market surveillance.

• ING Wholesale Banking announced that it is expanding its use of Apama, previously focused on algorithms for Benelux Small and Mid-Caps.  ING has re-engineered those algorithms to address markets in Hungary and Poland with a variety of features that include hybrid cross asset algorithms that leverage ING’s direct access within those emerging markets.

• SEB, the Scandinavian financial group, announced it will expand its use of Apama to deliver advanced order flow monitoring services within a compliance application.  This was a second SEB announcement, following one last year regarding the SEB deployment of Apama to support client trading in Exchange-traded equities and futures.

• And lastly, but certainly not least, together with Detica, a key partner, we jointly announced a Market Surveillance Accelerator.  Accelerators are extensions to the core Apama platform that help our customers jumpstart their deployments, incorporating business logic and other components like sample dashboards and adapters for connectivity.  In this instance, we are combining the technical know-how and experience of Detica and Apama – both of which are now supporting projects at the FSA and Turquoise - to address the growing demand for real-time market surveillance capabilities.  We’ve previously announced Accelerators for Market Aggregation and Smart Order Routing.   And there'll be more to come.
  

These three announcements collectively illustrate that a key part of the value of the Apama CEP platform is its versatility.  Apama may initially be deployed in support of a specific application like algorithmic trading or a specific asset class, but upon experience with the product, many of our customers expand their use to different asset classes, different geographic markets and/or entirely different applications – like compliance or risk or market surveillance.

Judgement Day

Earlier this week I was told by a client (a proprietary trading shop) that they were switching brokers - the bank to which they submit their (cash equities) orders for execution across a range of European and US Equity markets. Now this was intriguing to me - as I happen to know that their new broker implements their client-facing Direct Strategy Access (DSA) offering using Apama. So Apama will be generating orders and sending them to ... Apama. (Via FIX protocol as it happens)

Brought a smile ... but then they told me the rest. They were planning to go via this broker to a range of markets to run some new cross-market arb strategies - apparently their new broker provides access to more European markets with very low latency. One of their primary markets will be the new Turquoise exchange, which will launch in September. At this point you might see where this is going; at Turquoise their orders will be subject to surveillance by the Turquoise Market Abuse Detection system, built on top of ... Apama.

I am smiling no longer. Didn't Skynet start like this?

On (Complex) Event Processing

I'm sure this has been said before, but I had cause to think again today on what is actual "complex" about CEP. I've never been particularly comfortable with the term CEP (of course, my personal comfort is not required ...) as it suggests that CEP is in some ways "hard". Well, those of us in the business of building CEP technologies know that the challenges of processing 10s of 000s of events per second with sub-millis latency against 000s of event patterns with temporal and logical constraints introduces a shed-load of complexity under the hood - but that's the point really - it is (or should be) all under the hood; we don't call databases "tricky databases" just because they have some fancy background indexing and schema evolution capabilities inside them.

Anyway, that ship has sailed - and I digress. The thing that got me thinking about this (again) was the recent press release regarding our launch - with our partner Detica - of a Solution Accelerator for Market Surveillance. That press release gives some examples of the kinds of surveillance strategies - "front running", "washing" ec. - that the Solution Accelerator provides (along with a handy definition of what this jargon actually means). The point is that the event processing logic required for these types of applications is not in any way "complex" - e.g. "detect a spike in trading volume or rapid price move within 10 minutes prior to a news release regarding a particular instrument" - despite the machinations under the hood that might be required to do this in real-time for all trades and news articles for all listed instruments on an exchange.

No, what is key in supporting these types of applications or strategies is the *lack* of complexity - and the provision of tools allowing strategy builders - here, operational teams at the exchange - to quickly express the business logic, generate a Dashboard to visualise the alerts it generates, and get all this into production before it becomes irrelevant. As markets and traders become ever more sophisticated it is the ease with which strategies can be modified and new strategies deployed that determines whether CEP is the right technology or not, not how clever it might be under the hood.

The term CEP seems to be here to stay, and I'm certainly not volunteering to be the flag carrier for a terminology battle ("Event Processing"? Anyone?). But let's be clear that neither the use case nor the hoops that need to be jumped through to deploy it need be complex for "CEP" to be an effective technology solution.

The key to effective CEP technology is to keep as much of the complexity as possible away from the people who have to use it.

Asia Report: Fighting White Collar Crime

Hello from Hong Kong. As always it is fascinating to see how CEP is evolving in Asia. One trend I am observing is the huge interest in Hong Kong in rogue traders and white collar crime – and how CEP can be used to detect and prevent this – before it moves the market. Obviously the original rogue trader, Nick Leeson, is well known here. But there has been a great deal of interest in more recent goings-on, at firms such as SocGen. Amazingly, until a couple of years ago, insider trading was not illegal in Hong Kong! Now we have a highly volatile market, with a lot of uncertainty, huge event volumes and a real problem of seeking out and preventing rogue trading activities, as well as managing risk exposure proactively.

Of course CEP provides a compelling approach. In market surveillance - the ability to monitor-analyze and act on complex patterns that indicate potential market abuse or potential dangerous risk exposure can allow a regulator, trading venue or bank to act instantly. Banks want the reassurance that they are policing their own systems. Regulators need to protect the public. The media and public here find this fascinating.

On the topic of a different kind of white collar crime – consider using CEP to detect abuse in the gaming industry. The gambling phenomenon that has propelled Macau to overtake Las Vegas as the world’s biggest gambling hub is also an exciting opportunity for CEP. We have customers using CEP to monitor and detect various forms of potential abuse in casinos. Events that are analyzed to find these patterns include gamblers and dealers signing on at tables, wins and losses, cards being dealt etc. It is possible to detect a range of potential illegal activities, ranging from dealer-gambler collusion to card counting.

As a final thought - having met with some of our customers that operate both in Hong Kong and mainland China, it is clear that China is a massive market opportunity for CEP. Exciting times ahead for CEP in Asia.

CEP down under

I’m sitting here at Melbourne Airport in Australia on my way to Hong Kong. I’ve been delayed by a typhoon – probably a good reason to delay. After a very successful week in Sydney and Melbourne visiting customers, I thought I’d report that the CEP market is hotting up down under! As you would expect financial services is an early adopter and Apama has had several customers in Australia in this space for a few years now. But the demand is increasing. This is driven by factors such as increasing competitive pressures in the trading space and the impending fragmentation of the Australian market. Just like in Europe and North America, it is likely that several new trading venues will join the Australian Stock Exchange in offering liquidity in Australia. My diagram shows some of these in the form of Chi-X, AXE and Liquidnet.

Complex Event Processing offers a powerful way of monitoring, aggregating and analyzing the liquidity across all of these markets, as well as making real-time routing decisions. This of course can work in parallel with traders and algorithms. In fact it is becoming very interesting to see trading decision algorithms routing messages to execution algorithms, routing messages to liquidity tracking algorithms, routing trades to the market, which are being checked by market surveillance algorithms -- and all part being implemented in CEP. I am biased of course, but what other technology can offer the seamless federation of such systems. Events provide a powerful and low latency mechanism for such interoperation. Each component can be built independent of the other - but yet they can work together seamlessly. But I am getting off topic!

Over the last few years Australia has mainly been interested in equities algorithms, but now the interest in FX, futures, bonds and commodities is growing. While I was in Sydney, I was pleased to deliver the keynote address at the Trading Technology conference and met many interesting sellside and buyside participants with a variety of trading interests. It was fascinating to see how the market is developing.

And it is not just financial services where CEP is being applied down under. I also met with organizations in a number of other spaces including travel, transportation and location-based services. I hope to report more on these in the near future.

And now I look forward to finding out what is happening in Hong Kong and Asia beyond. Hopefully I can avoid the typhoon!

John