Guarding Your Blind Side on the Buy Side: The Promise of Real-Time Analytics
Peter Simpson, our VP of Streaming Analytics, was invited to write an article for Traders Magazine about the benefits of using streaming analytics on the buy-side. In the article, he points out that, “The end-of-day reporting that firms have traditionally relied upon is no longer enough – as a customer once said, you wouldn’t decide to cross a busy street based on a picture of that crosswalk taken yesterday.”
Essentially, there is no benefit to waiting until tomorrow to make decisions that affect the performance of a portfolio or to take action on risk or regulatory compliance issues. The tools exist today that enable portfolio managers and compliance officers to monitor trading activity, P&L, risk, and a wide range of other factors during the trading day and take immediate action.
Peter continued, “Real-time analytics are enabling an increased transparency in execution quality across the industry. Historic views of trading data support investigation, back-testing, and optimization of trading processes. Visual displays showing events tick by tick – nanosecond by nanosecond with sequence IDs – were once available only in the surveillance department but today are used on the trading floor as well, where they enable quantitative analysts to investigate market microstructures throughout the trading day.
Critically, real-time streaming analytics make predictions based on historical data and then continuously compare real-order execution metrics to those predictions. In this way, they reveal the anomalies, the unusual events that can give you an edge – or show you the edge you want to step back from. When everything goes as expected, there’s not much to see. But in the real world there are always issues to resolve and opportunities to exploit. For example, imagine that the intraday Value at Risk (Var) exceeds the three-day VaR. The portfolio manager must be able to see that this problem exists, examine the intraday trading data to discover exactly what is driving the VaR spike, and work out the best approach for bringing VaR back into line.”
Click here to read the full article.
Essentially, there is no benefit to waiting until tomorrow to make decisions that affect the performance of a portfolio or to take action on risk or regulatory compliance issues. The tools exist today that enable portfolio managers and compliance officers to monitor trading activity, P&L, risk, and a wide range of other factors during the trading day and take immediate action.
Peter continued, “Real-time analytics are enabling an increased transparency in execution quality across the industry. Historic views of trading data support investigation, back-testing, and optimization of trading processes. Visual displays showing events tick by tick – nanosecond by nanosecond with sequence IDs – were once available only in the surveillance department but today are used on the trading floor as well, where they enable quantitative analysts to investigate market microstructures throughout the trading day.
Critically, real-time streaming analytics make predictions based on historical data and then continuously compare real-order execution metrics to those predictions. In this way, they reveal the anomalies, the unusual events that can give you an edge – or show you the edge you want to step back from. When everything goes as expected, there’s not much to see. But in the real world there are always issues to resolve and opportunities to exploit. For example, imagine that the intraday Value at Risk (Var) exceeds the three-day VaR. The portfolio manager must be able to see that this problem exists, examine the intraday trading data to discover exactly what is driving the VaR spike, and work out the best approach for bringing VaR back into line.”
Click here to read the full article.
