The Technology of an Equity Trade John OHara CEO Taskize QCon - PowerPoint PPT Presentation

The Technology of an Equity Trade John O’Hara CEO Taskize QCon London 2013

Topics… • Equity market backgrounder • Business processes • The equity systems pipeline • Which kinds of system go where? • Technology products you may find • Context within a large bank

Leading electronic equity markets Largest by value: $13 trillion on NYSE Largest by volume: 1.4 trillion trades on Indian NSE 2012 World Federation of Exchanges Market Highlights

Primary electronic trading patterns HFT No Touch Low Touch High Touch Direct Market Direct Strategy Programs / Single Orders Access (DMA) Access (DSA) Baskets Latency aware Client Connectivity Latency sensitive Single Orders Regulatory reporting 1 order Market Data Program yields 5 trades 100 orders Trading System yields 1 trade Algorithmic Trading Algorithmic Engine Trading Engine Market Connectivity Co-located Gateway Exchange Matching INTERNAL CROSSING DARK EXCHANGE MARKETS NETWORKS POOLS Engine Increasing Commission rates and Human Interaction

Equity transaction volumes Deal Volume 700% Deal Size 85% 10 years

We are much more focused today on operations and technology and being a low-cost provider than we would have articulated about ourselves 10 or 15 years ago Lloyd Blankfein, CEO Goldman Sachs November, 2012

These are not low- cost people…

The time is right for a giant leap forward, with economic pressure and technological potential creating the conditions for change The Triple Transformation, McKinsey October, 2012

Low cost Scalable Accessible Innovative

Pre-trade Trading Market Origination Pricing Services Connectivity Making Order P&L Execution Figuration Allocation Management Reporting Confirmation Lifecycle Risk Limits Regulatory and Management Management Management Reporting Matching Margin and Credit Risk Settlement Accounting Collateral Controls Management and Clearing Management Client Management Master Data Market Data Management Informatiom

Speed & Latency Reliability & Throughput Regulatory Market Reporting Risk Smart Allocation Fund Sales Block Settlement Exchange Order Booking & Custodian Manager Trader Trader & Clearing Routing Figuration Trans. Profit and Cost Loss Analysis Simple order flow through systems

Client Parent Child Market Street Fill Allocation Order Order Orders Order Side Smart Allocation Fund Sales Block Settlement Exchange Order Booking & Custodian Manager Trader Trader & Clearing Routing Figuration FIX Financial Information Exchange Order books and trade matching at almost every step

Electronic Regulatory Market Comms Reporting Risk Network Smart Allocation Fund Sales Block Settlement Exchange Order Booking & Custodian Manager Trader Trader & Clearing Routing Figuration Multilateral Trans. Profit and Trading Cost Loss Facility Analysis Real Time Tick Market Database Data Global smart order routing

Electronic Regulatory Program Market Comms Reporting Trading Risk Network Smart Allocation Fund Sales Block Settlement Exchange Order Booking & Custodian Manager Trader Trader & Clearing Routing Figuration Multilateral Trans. Profit and Trading Cost Loss Facility Analysis Real Time Tick Market Database Data Program-trading: Process large baskets automatically

Electronic Regulatory Program Market Comms Reporting Trading Risk Network Smart Allocation Fund Sales Block Settlement Exchange Order Booking & Custodian Manager Trader Trader & Clearing Routing Figuration High Multilateral Trans. Profit and Frequency Trading Cost Loss Trading Facility Analysis Real Time Tick Market Database Data High Frequency Trading / Market Making

Different kinds of technology in the life cycle CEP Engine Spaces ‘put/take’ Grid computing architecture Functional programming Electronic Regulatory Program Market Comms Reporting Trading Risk Network Hardware DB In-memory databases Standardised messaging appliances Hi speed journals Java applications C# desktop apps Data ETL for regulators Smart Allocation Fund Sales Block Settlement Exchange Order Booking & Custodian Manager Trader Trader & Clearing Routing Figuration Hardware messaging appliances Long-lived Short-lived High Multilateral Trans. workflows Profit and workflows Frequency Trading Cost Loss Trading Facility Analysis Identical cable length to every server 100TB time series DB Fast single-thread execution Specialised languages Real Time Atomic clocks Tick Market Database Data Specialised 10Gb Card Prepared network frames

An unscientific survey… Electronic Regulatory Program Market Comms Reporting Trading Risk Network Smart Allocation Fund Sales Block Settlement Exchange Order Booking & Custodian Manager Trader Trader & Clearing Routing Figuration High Multilateral Trans. Profit and Frequency Trading Cost Loss Trading Facility Analysis Real Time Tick Market Database Data Product names, logos, brands and other trademarks referred to are the property of their respective trademark holders. This diagram is presented “as is” and no warranties or representations as to accuracy, completeness, suitability or fitness for purpose are expressed or implied.

Investment bank… Investment Bank Mergers & Acquisitions Prime Brokerage Fixed Income Commodities Equities Credit FX • 1,000 - 2,000 systems 8,000 - 10,000 technology staff • • $1 Billion development and maintenance

Global bank… FX Retail Bank Investment Bank Fixed Income Credit Cards annual technology costs Global Bank $10 Billion Equities Investment Bank Approx Prime Brokerage Commercial Bank Commodities Assest Management Credit Corporate Advisory Mergers & Acquisitions

 Banks are industrialising  A new era of banking technology  Robust technical leadership is needed