Streaming Trading Data For Compliance

Streaming trading data for compliance is not as easy as in the movies.

Streaming Trading Data For ComplianceBy Jasmine Noel    4 February 2016      Thinking

I was chatting with a colleague about the unbelievability of action movies recently. In Shadow Recruit, Jack Ryan is a mild mannered financial compliance officer by day (probably working on getting MiFID II delayed) – and a super-human financial analyst by night. He can simply glance at a rapidly scrolling stream of financial data and gain the spark of insight needed to know the exact time of a coordinated physical and monetary attack. A terrorist plot, decades in the making, is unraveled in a few minutes.

Hollywood aside – most compliance officers would love to do what Jack Ryan did in that movie. Go to a stream of data, pull out the relevant bits, correlate and gain that spark of insight to answer whatever question their regulators were asking that day and quickly generate reports to prove compliance.

The stream of data is important for compliance because the most accurate timestamp for a particular trade request is found by seeing when the network packets carrying the trade order left the trader’s system. Typically, this is not the same time stamped by the application log.

We discovered this working with some of our trading clients who were looking for an answer to a different set of questions around using operational speed as a competitive weapon, for example:

  • If my latency increases, should I withdraw from the market or stay in?
  • If I reduce the latency of my IT systems, will it make a difference to fill rate?

We found that application log time stamps varied widely depending on how the developers coded the software. This can make correlating data from multiple systems to piece together the actual sequence of events a complete mess.

To paraphrase Donal Byrne’s WallStreet & Technology article: We need a higher level of timestamp precision. However, simply having precision timestamps for compliance is the easy part of the problem. The hard(er) part is ensuring the accuracy of the recorded timestamps so that we can confidently determine the relative time between two events, and trust the results.

Furthermore, regulators are asking for kill switches, which we’ve talked about before, but effective use of a “big red button” means we need to know exactly when an event occurred. Before you can even start to properly deal with anomalies, whether trading or IT related, you have to have real-time visibility and that confidence in reconstructing a timeline.

The timeline recreation is what makes MiFID II compliance requirements tricky in the real-world of 2016 where trillions of transactions traverse financial networks every day -- without any super-human Jack Ryans around to save the day.

Streaming Trading Data For Compliance

Jasmine Noel, Product Marketing & Sales Enablement, Corvil
Corvil safeguards business in a machine world. We see a future where all businesses trust digital machines to algorithmically conduct transactions on their behalf. For some businesses, this future is now.

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