The StreamBase Event Processing Blog

CEP in Brazil, Breaking New Speed Barriers

(Mark Palmer is the CEO of StreamBase Systems. Follow him at twitter.com/mrkwpalmer)

This week StreamBase cleared another hurdle in the race to take CEP into the mainstream by announcing the first application of its technology to facilitate high-speed trading between assets traded in Brazil and overseas (coverage by Jonathan Wheatley from the Financial Times, São Paulo). Kairos is an excellent case study about three fundamental motivations for CEP technology: speed to get into market, speed to execute event-based systems, and speed of application evolution.

The Brazilian trading market illustrates why time-to-market is so important in the capital markets. As the Financial Times reports, "The BM&FBovesp was formed last year by the merger of the São Paulo futures and stock exchanges - and is currently the fastest-growing exchange in the world according to Mondo Visione, which tracks global exchanges. Its market capitalisation grew by 17.6 per cent in September and by 65.7 per cent over the past year." Kairos believes that algorithmic trading volume on BM&FBovesp will have grown fourfold by the end of the year. That kind of change in market structure presents opportunity to the firms who seize it first.

Kairos' use of event-based technology helped them be the first firm to trade across borders between Brazil and overseas. "With the [event feed] adapters in place, we just connect to the market data and it is easy to implement our strategies in the software - that's one of the main reasons we chose StreamBase." said Gustavo Jacob, CTO at Kairos (from Kairos Bows StreamBase for Algo Data by Max Bowie from Inside Market Data). In an interview I attended Gustavo also spoke of evolving the system every single day as trading opportunities emerged. 

StreamBase was founded on the idea of targeting a 50X improvement in performance over traditional, transactional database technologies. But comparisons between CEP and transactional database technology stopped years ago and now we're more often compared to custom C++ or Java code. Kairos said that their new CEP-based system is 100 milliseconds faster than their previous built-for-purpose application and that it can be changed rapidly—two achievements that are "not possible using standard electronic systems."

Finally, in the A-Team article Kairos Asset Management Taps StreamBase for Algo Trading, Alberto Araújo, the managing director of Kairos, explained their evaluation process and findings:

“Our evaluation process started in mid-2008, when we started looking at the leading CEP companies. Our developers downloaded StreamBase and got to work developing a new algo trading system and were amazed at how easy it was to build applications. After a few months of testing, StreamBase was the clear winner,” says Alberto Araujo, COO at Kairos. As well as evaluating StreamBase, Kairos also considered CEP technology from Progress/Apama and Coral8 (since acquired by Aleri). StreamBase won, says Kairos CIO Gustavo Jacob, because of the ease and speed with which new trading strategies can be created, typically in around two weeks. Specific functionality that gave StreamBase an edge was its visual approach to event workflow and debugging, unit testing and profiling capabilities, and existing connectivity."

We've had an amazing year of competitive public endorsements, including CME Group, PhaseCapital, RBC, ConvergEx, and BlueCrest, and now Kairos. We believe passionately that we have the best CEP product in the industry, and actively encourage anyone to try it to see for themselves.

Performance in three dimensions—speed to get into market, speed to execute event-bases systems, and speed of application evolution—are why CEP entrepreneurs are having fun, growing, and breaking down new business barriers.

Thomson Reuters Acquires Vhayu: What Does it Mean?

The news today in the field of event processing is that Vhayu Technologies was acquired by Thomson Reuters, sparking a flurry of inquiries from press and analysts asking: "How does this change the complex event processing (CEP) landscape?"  The short answer is: it doesn't.  

Event storage is not synonymous with event processing.  Vhayu's tag lne is:"Store and query years of tick data."  The ability to store and query years of tick (event) data is crucial for back-testing real-time systems, for historical analysis, and for research and development of high-frequncy trading strategies.  Event processing is used to help applications monitor, analyze and act on streaming data in real-time. Usually, customers use both at the same time to process historical, and real-time, streams of events. 

Indeed, this is why Vhayu and Thomson Reuters are both strong partners with StreamBase (Vhayu and StreamBase Partner to Provide Real-Time and Historical Market Data Solutions... and StreamBase and Reuters Extend Next-Generation Market Data Development Environment).  These are not "Barney" partnerships ("I love you, you love me:") - the partnerships are driven by customer use.  For example, RBC uses StreamBase and Vhayu together.  And StreamBase and Reuters is one of the most common and critical link our platform supports, and has supported, for years.  

So what does all of this mean?  It means that the event processing market is continuing to grow in importance - both the database side and the event-processing side.  It means the "IBM of Capital Markets," Thomson Reuters, has endorsed event processing, again.  And when viewed in the context of strategic enterprise endorsements of CEP like CME Group, it means event processing is continuing to gain market and strategic momentum in the capital markets.   

StreamBase & Phase Capital on CNBC: Trading on Twitter

Trading on Twitter: Opportunity, Danger, or Folly?

(Mark Palmer is the president and CEO of StreamBase Systems.  Follow him at twitter.com/mrkwpalmer)

This week my company issued what I thought was an innocuous announcement - our software now allows applications to process Twitter tweets with an application and analyze the contents of the messages in real-time. A firestorm of debate ensued, and the issue gained mainstream media coverage in the Financial Times, the Telegraph, CNBC,and dozens of others. The debate gives us pause to consider the role of the sweeping adoption of Twitter as a real-time, global information source, and how that information might be used beyond the mostly social nature of Twitter today.

One of the examples we cited for this technology is automated trading on Wall Street, where any of the 16 million tweets a day can be analyzed in real time as a means to inform trading decisions.  Wall Street tends to be an innovator with new technologies, so it’s useful to use it as a petri dish to examine some of the opportunities and issues around Twitter in a business context.

Trading on rumor is a time-honored trading technique.   “Buy on rumor; sell on news” is one of the oldest mantras on Wall Street and Main Street alike.  Any tool that improves the speed or quality of transmitting information is of interest to traders.  Twitter does that.   But be careful what you ask for – lots of the tweets on Twitter are garbage – scam artists and manipulators.  On the other hand, there are thousands of credible sources of information, from the SEC (@SEC_Investor_Ed), to the New York Times (@NYTimes), and even exchanges like CMEGroup (@CMEGroup), which has over 500,000 people subscribed to its tweets about the futures and options markets, and more. 

And beyond any individual source, and probably more uniquely, Twitter allows instant access to the sentiment of the masses.

In the Wall Street & Technology article, Todd C. Mirabella, chief investment officer and principal of New York hedge fund QAT, says one of the uses he has found for Twitter is to help look at market volatility and compare it. "So how we get our information, that's the trick. Twitter can give us information on retail " [Tweeters] are the herd," he says.

For example, anything new that Apple does throws Apple’s stock into volatile gyrations.  The recent launch of the iPhone 3GS set off a rash of Twitter tweets about what the herd thinks – taken together, they can reveal sentiment – good and bad. Getting that feedback a few seconds faster, or a little better can make a big difference in trading returns. 

Business leaders, from CEOs to inventors, use Twitter.  For example, Richard Branson (@richardbranson), the CEO of Virgin, tweets regularly.  Now I’m pretty sure the news in the first tweet about Jimmy Fallon isn’t actionable for trading Virgin stock, but the fact that he’s ordering $2.1 billion worth of new planes might be.

Nasir Zubairi, former product manager for algorithmic trading and FX E-commerce, RBS, put it this way in the Wall Street & Technology article:  "[Twitter can be] the fastest source of news, particularly in reference to trading and algorithmic trading," he says. "News feeds are gaining a lot of popularity. Twitter provides the medium in that people, who are there, experiencing things, are able to broadcast their sentiments to their user base via tweets. This provides lots of competitive advantage to firms with trading strategies."

News about world events moves the foreign currency markets as Mr. Mirabella also pointed out.  He’s not yet trading on Twitter but said he sees real use for Twitter in currency trading: "We like to trade in ranges," he explains. "That helps us characterize the extreme edges in any specific currency. We've been trying to follow more individualized Twitter sites to see if we can get extreme views [of Tweeters]. It does give us flavor for what types of ranges we're looking at."

But real use of Twitter has some serious issues.  Technically, it wasn’t built for the kind of quality of service that a robust news source, like Reuters (@Reuters), provides – what happens when Twitter is unavailable?  There are questions about latency of the transmissions – is it fast enough?  Can it be faster?  Authentication and forgery are challenges – there’s a big difference between the real Richard Branson (@richardbranson), and the fake Richard Branson (@sirdickbranson) - who is responsible for the quality and reliability of the information transmitted via Twitter?  Should it be regulated?

And regulatory issues abound, as well.  Trading decisions are moving faster, so regulators have to move more quickly, too.  In December the unfortunate trading run on United Airlines (UAL) (read the story from the Wall Street Journal) stock to drop from $12 to $3 in just 15 minutes only served to remind us how quickly conditions can change in an era of sweeping automation.  The chain reaction was started by an erroneous trading signal from an old story that the Google news crawler picked up from 2002.  How can we guard against these unintended technology-triggered mistakes?

The adoption of Twitter in a social context has been swift, massive, and global.   As technology like event processing makes the content contained in Tweets readily available to business applications, the questions of what to do with this power and responsibility looms large.

Postscript and continued debate (July 1, 2009)

Since this writing, there has been a flurry of response - positive, negative, and vitriolic.  

My favorite coverage was the excellent, balanced story by Melanie Rodier at Wall Street & Technology: Algo Traders Connect to Twitter. She did her homework, including comments by some well-respected people from the trading industry. Read it first.

CNBC's Day-Trading 2.0:  Twitter Takes on Stocks took a day-trader's view on using Twitter to understand market sentiment.  

The Telegraph's coverage, Hedge fund managers betting Twitter will give them an edge in rapid trading also covered the intelligence and military side of the potential use of Twitter.

A spirited message board debate on Server Side was provoked by John Davis (@jtdavis) from OnixS. Like many message board debates, there are rat holes, but there's good stuff there, too.

There was an assertion that StreamBase's announcement of Twitter connectivity is a cheap marketing gimmick. It isn't. This announcement was driven by current and anticipated customer demand, as you can see from our history of connecting to Alpha Trading, Interactive Data, Lime Brokerage, Reuters, other news and data sources of many types, and so on. The article you're reading illustrates the balanced way we're talking about Twitter.  

One blogger, who used to work for one of our competitors, TIBCO, even took the opportunity to predict that StreamBase will be trounced by the "big boys" as they enter our market! To that, I say: "bring it on." Dr. Michael Stonebraker is one of the inventors and thought leaders in event processing, and StreamBase is known as one of the leading businesses in the CEP market, renowned for its performance and ease of use. Are we wary of their deep pockets? Yes. But the big companies have yet to field compelling products - in fact, we rarely compete with them. Furthermore, the "big boys" have not showed signs of innovation and intrapreneurship as I wrote in When Microsoft enters your market:  cause for worry or cause for celebration? And in Innovation: why size doesn't matter, I countered the argument that big companies are the most effective at innovating in a market like CEP. Richard Tibbetts, StreamBase CTO, clarified IBM's recent claims of innovation as misleading in On IBM, unstructured data, and CEP.  Finally, and most importantly, our customer endorsements from CME Group, BNY ConvergEx, BlueCrest, and PhaseCapital and many more say it best - directly from our customer's mouths.

Innovation by the Numbers at CME Group

(Mark Palmer is the president and CEO of StreamBase Systems.  Follow him at twitter.com/mrkwpalmer)

Recently, I spent a day in Chicago with CME Group, the world’s world’s largest and  most diverse derivatives exchange, to talk about their approach to innovation.  As the CEO of an innovative software company founded by forward-looking MIT techies, I’m lucky enough to work with a lot of innovative people.  But as we talked about the size and scale of CME Group’s business, it struck me that this may be among the most technically challenging environments on planet earth, and the numbers tell a compelling story of challenge and opportunity for a firm that many know of, but few have seen inside. 

CME Group is the modern descendent of the Chicago Mercantile Exchange (CME), the American financial and commodity derivative exchange which was founded in 1898 as the Chicago Butter and Egg Board, and in the past 111 years, grown and transformed into the world’s largest electronic futures and options exchange (Globex).

But I wasn’t visiting CME Group to check out their museum, I was there to dig down on the business and technical motivation behind the news that they have selected a new development paradigm (press release, coverage in Wall Street & Technology), event processing (CEP), on which to build future innovations.  This is a watershed moment for the CEP industry, and an important case study that gives us pause to wonder about the future of automated business, the future of real-time, mission-critical infrastructure, and the role of event processing as the platform for that innovation.

So let’s look at innovation, CEP, and the challenges faced by CME Group: 

...1.2 quadrillion dollars ($1,200,000,000,000,000,000) 

                                           ...The underlying value of the contracts traded by CME Group in 2008

How can a firm stay on the innovation edge while simultaneously supporting the most mission critical operations?

The decision to process 1.2 quadrillion dollars of value was not taken lightly at CME Group. It’s been said that “nobody gets fired for buying IBM” – that is, that big companies are the safe choice when a decision is most critical. 

But when innovation must ride beside reliability, decisions get trickier.  A company like CME Group must balance innovation with mission-critical capability.  And, in the case of CEP, CME Group’s decision illustrates that CEP has come of age.

However, there’s been a rash of recent debate about the entrance of IBM and Microsoft into the CEP market.  Recently, the New York Times published an article, which declared that innovation is moving to big companies from small companies – a conclusion that is not only wrong, it flies in the face of all the most basic tenets of innovation.  So in the innovative, fast paced CEP market, we are wary of, but don’t fear, the entrance of giants like IBM and Microsoft.  Indeed, we welcome it, because it draws more awareness.  The more people look, the more will buy StreamBase.

And from the customer’s point of view   I asked Steve Goldman, CME Group’s Director of Enterprise Architecture, if he had looked at IBM and Microsoft, and his response was casual:  “The decision was very difficult but we felt that based on our environment and needs thatStreamBase was a proven solution.” 

11,000,000...

                   ...The current average daily volume of futures contracts traded every day by CME Group...

“Our data feeds are like fire hoses,” Goldman said.  “Sometimes, we process a few hundred market data changes a second.  But when the markets get volatile, we process tens of thousands of market data changes per second. And, to make it even more challenging, our customers demand the fastest response time – in milliseconds – when volatility is at its peak.” 

Real-time response is becoming more and more important in mainstream business.   Any environment that deals with events (stock market price changes, web site click data, and so on), can benefit from event processing.  And the technological challenge of managing events at high speed, and with low-latency, requires a host of arcane tooling and expertise.  These geeky areas will also repay deeper exploration, including specialized messaging hardware and software, clever use of modern computing models like multi-core CPUs, grids, and clouds, FPGA’s, and efficient management techniques to keep it all running smoothly.

But modern CEP engines are becoming an essential tool for managing enterprise-class streaming IT environments – a better way to manage information that comes through a fire hose.

Hundreds....

                ...The number of products offered by CME Group...

While most businesses might have a few products, or a big business might have a dozen products, CME Group has hundreds of products. But CME Group’s products aren’t made of physical materials; they are built with software development tools.  So the speed and effectiveness of software development at the CME Group dictates the speed and growth of their business.

So the news that CME Group has chosen a new enterprise-wide development paradigm is important news.   CEP, which has been rising to prominence in the past 5 years, flips traditional database-oriented computing on its head.  CEP allows an application developer to design logic that examines what’s happening now instead of what happened in the past.  Options pricing and settlement consumes vast amounts of streaming information, so the CEP model fits perfectly, and allows CME Group to quickly create new products that process those streams.

Any business that has streams of data – from web clickstreams to point-of-sale transactions to financial market data - can apply CEP to more quickly and easily bring new products to market.  When the development methodology matches the form of the data, innovation approaches the speed of human thought.

80...

        ...The number of countries where CME Group's Globex provides regulated exchange access...

Although everyone talks of the inevitability of a global economy,  few firms understand its practical challenges than CME Group. CME Group offers electronic, regulated exchange access in over 80 countries.

The host of technologies that enables a 7x24, global operations are many.  But CEP, by making streams of data from all over the globe more intelligent, can make network event processing smarter and faster, and is becoming an important element in enterprise IT infrastructure.

Which leads to a critical innovation issue:  how to strike the right balance between a new technology and a proven technology?  A full answer to that question is outside the scope of this article, but the key elements for enterprise software products include well-designed threading architectures, bullet proof fault tolerance systems, robust management tools, comprehensive testing and debugging tools, and profiling tools. Consider that CME Group traces its origin to 1848, has NEVER had a default or a loss of customer funds resulting from failure, today announced its enterprise deployment of CEP technology.   This is the clearest signal yet that event processing is coming of age as it continues through its rapid growth as a software market.

A few milliseconds....

                                ...the response time necessary at the most heavily loaded times....

To see the manual forms used at exchange over 50 years ago puts the innovation in the capital markets  in perspective.  It took many seconds to fill out the information about trades back then; it takes 400 milliseconds (1/1000 of a second) for the human eye to blink;  today, CME Group’s trading decisions take place much faster than the blink of an eye – in just a few milliseconds.  How can this kind of latency be achieved in the face of massive volumes and massive global distribution?

We discussed the role of CEP in turning the traditional database-oriented model on its head.  Databases, of course, rely on writing data to disk.  The typical seek time for a disk is about 9 milliseconds.  CME Group’s data can change tens of thousands of times per second;  in order to make decisions in a few milliseconds

Exchanges settling contracts, brokers splitting up and routing client trades, electronic liquidity providers making markets, hedge funds finding and executing arbitrage trades, banks delivering currency rates…all in less than one hundredth of a human blink!  Applications are measured in microseconds, and the tools that do the measuring have resolution in nanoseconds, that’s one billionth of a second.  

StreamBase has been emerging as the top CEP company for some time now due to its proven rapid development environment, standards-based approach, high performance, low latency, and mission critical, fault tolerant architecture.   CME Group’s selection of StreamBase is yet another proof point that demonstrates that CEP is ready for the big time, and that StreamBase is leading the way.

That’s why CME Group made this important decision for their real-time, low latency operations – the need for speed, and the need for CEP, is critical at CME Group.

Massive scale.  Instantaneous response.  Constant change.  Nonstop operations. Taken individually, these are big technical challenges; taken simultaneously, they are an extreme business risk.  But risk for one is opportunity for another, and as CME Group shows us, by keeping an eye on the three key “abilities” – usability, reliability, and scalability –firms can keep innovating as business conditions continue to get more complicated.

 

Finding Alpha: Be Fast, Be Smart, or Be Dirty

(Richard Tibbetts is Chief Technology Officer at StreamBase Systems. Follow him on Twitter as @tibbetts)

When it comes to algorithmic trading, everyone is looking for alpha, outsized returns which exceed your risk. In an efficient market, there would never be any alpha, so seeking alpha means seeking inefficiencies in the market. The problem with market inefficiencies is that they don't last. The mere act of using them depletes the available revenue - when others join in, the opportunity can go away very quickly.

So not only do you have to find alpha, you have to find sustainable alpha. Since a lot of customers use StreamBase and complex event processing for algorithmic trading, I see a lot of alpha seekers. Three attributes seem to consistently contribute to sustainable alpha: being smart, being fast, or being dirty. To create a sustainable strategy, mix in at least one, and preferably more of these components.

Smart — The best-known way to create sustainable alpha is to be smarter than the competition. Unfortunately, on Wall Street, genius is a commodity, so trading techniques must be both creative, and evolve. Industry analyst AITE Group found that some algorithms have a shelf life of only a few weeks. And, since market conditions are constantly changing, “smart” is never “static.” Finally, if you can discover something based on easily available public information, the other geniuses won't be far behind. So smart, the best way to achieve alpha, must also be creative, and must also constantly evolve and get smarter as market conditions evolve.

Fast — Another way of securing alpha is to be faster than the competition. This means making decisions quickly, then executing your trades before competitors can execute theirs. Efficiency and speed is important for any system, but if you are betting on being the fastest, ultra-low-latency execution management will be keeping you up at night. The challenge with fast is that it's easy to spend money to get faster. If you are a small company, larger competitors with will always be able to outspend you, so you must take advantage of your size. In 8 Lessons for Entrepreneurs – A Case Study Based on Phase Capital, the lessons from this small, innovative firm included leveraging automation, building incrementally and quickly, and choosing the right partner. On the other hand, large companies can fight off more nimble competitors with their scale, reach, and ability to choose and deploy bleeding edge technology that smaller IT departments cannot support. In either case, you must exploit your natural advantages to stay fast.

Dirty — Finally, you can be dirtier than the competition. I don't mean being ethically questionable. Instead, I mean working with markets, information, and technology that others avoid. Developers and quants both like systems that make sense, clean systems that have been developed by like-minded engineers and are easier to work with. Getting your hands dirty with legacy systems, systems that haven't yet been polished to industry standards, or systems which were never designed for trading exploitation is one way to distinguish yourself. For example, trading in emerging markets often requires getting your hands dirty. But it also lets you trade securities that others aren't following as closely. Trading uncommon or unknown products is one strategy for finding alpha. So is trading based on non-financial information. This has famously been done with weather data and Amazon sales information. Steve Steinberg gave a great presentation on this at O'Reilly's Money:Tech. Working with these data sources may require checking your engineering sensibilities at the door, but the rewards can be substantial.

Lots of trading firms use complex event processing as their platform to create alpha-seeking strategies. But not all CEP platforms are the same. So, when selecting an alpha-generating technology platform, it is important to know what kind of strategy you are building, and what key technical elements you’ll need to meet your requirements.

To build smart strategies, a development platform must have a flexible programming language, good development tools (debugger, profiling, testing), and a good backtesting environment so that you can design, test, deploy, and evolve smart alpha-seeking strategies. There is no one more frustrated than a smart quant who is told by developers that his new strategy can't be built in their system. For example, can your platform handle multi-security strategies? Cross-asset strategies? Plug in analytics written in your quant’s' favorite programming languages? All these features and more may be required to support smart strategies.

To build fast strategies, you will need a platform and deployment environment that supports ultra-low latency. This will generally require collocation at the site of your favorite exchange. If your strategy requires interaction with multiple exchanges, than your deployment architecture must take into account the wide area network latencies involved. Your development platform should also support low-latency data transports like Infiniband, and have a multi-threaded architecture that optimizes the processing of individual events. And for some fast strategies, throughput and scalability will also be important, so multi-core technologies, clustering, and cloud computing techniques may be required.

To build dirty strategies, your platform needs to ingest any kind of data you might need. This could include unstructured data processing for handling news, analyst reports, underlying data that effects, for example, a derivative like weather information, and so on. An effective platform for dirty alpha-seeking strategies requires APIs and development tools which support building connectivity quickly. Pre-built vendor connectivity is nice to have, but for a dirty strategy you are likely to connect to arcane information sources or technologies.

If you are planning to find alpha, know what your goals are. When selecting a platform, make sure it supports the kind of alpha you will generate. If you choose correctly, the platform will help secure your alpha against the competition.

When Microsoft Enters Your Market (CEP): Cause for Worry or Celebration?

(Mark Palmer is president and CEO of StreamBase Systems)

This week, Microsoft announced they will enter the technology space inhabited by my company, StreamBase.  Naturally, I got a flurry of questions, ranging from: "Is Microsoft's entrance going to crush your business?" to "Could Microsoft entering your market be validating?"

The question behind these questions is:  "How can a company with less than 100 people compete with Microsoft?"

First let's start with some background:  what is complex event processing, or CEP?  CEP is an enterprise software technology - big companies buy it to do big things.  CEP is kind of like a database, but turned on its head for real-time decision-making.  For example, Orbitz uses CEP to monitor their business in real time - when there's a problem, Orbitz knows about it in milliseconds, which means they can do something about it before its too late.  And they can change the logic for detecting and responding to problems on the fly. Databases, in contrast to CEP, are designed to help a company look at what already happened, not what's happening now.  Clearly the database is an essential tool that can inform future decisions.  But knowing what's happening now helps identify and therefore seize business opportunities that exist for just a short time, like fixing your problem on Orbitz before you leave and go to Travelocity.  CEP is increasingly becoming a critical tool for the enterprise.

The most extreme, and common, use of CEP is in the capital markets - firms like Deutsche Bank, JP Morgan, and RBC use CEP to automate their trading decisions.  The financial markets produce millions of events every second, and opportunities to make money last, in some cases, for minutes, or, in some cases, for milliseconds. The systems that identify and exploit those opportunities are under constant development. In trading, rapid development and instant action aren't luxuries;  they directly impact revenue and competitive differentiation.

So, can Microsoft dominate CEP?  In his groundbreaking book Intrapreneuring, Gifford Pinchot researched the success and failures of innovative efforts in large U.S. corporations.  At a macro level, he found that big companies, statistically, are terrible at innovation: 

You might think that larger organizations would be stodgy in thinking up new ideas, but, because of a wealth of management talent, would be very good at executing them.  It turns out, however, that just the reverse is true:  our large organizations are producing large numbers of good ideas but generally are unable to implement them." 

This, of course, is why the venture capital industry is alive and well - innovation naturally comes from small firms.  However, Pinchot went on to describe that when big companies act like little companies, they can innovate.  But they must create small groups, accept and expect failure, let these groups be autonomous, hire different kinds of people, compensate them differently, manage them differently, and get close to customers.  All these attributes fly in the face of traditional big company culture.  

But Microsoft has pulled off innovation before - are they doing it here according to Pinchot's findings? It's a CEOs job to watch for competitive threats, and I see no evidence to suggest Microsoft is approaching CEP in a way that portends success.  Nimble moves by Microsoft could include:  recruit top visionary CEP engineers (they haven't); create a small, independent group (they didn't - the product is coming from the SQL server group, which has hundreds of engineers); get out and talk to customers directly and co-develop with visionary partners (we see no evidence of this); recruit and empower entrepreneurs and empower them to break down corporate structures (Microsoft didn't do this either).

So the physics that would make an entrepreneur worry just aren't there at Microsoft's CEP effort.

Which leads me to my current answer: the fact that Microsoft is trying to get into CEP is a big, important endorsement for CEP.  And since we think we have the best CEP product available (as many others who have evaluated us have found), we invite the competition.  If Microsoft's endorsement makes corporations more aware of CEP, it's better for StreamBase.  

Welcome, Microsoft!

Building an FX Aggregation System

We just finished designing a presentation on FX Aggregation and complex event processing (CEP) that we'll deliver as a webcast on Thursday, April 16th at 10AM (register here).  Over 700 people signed up, which shows how much interest there is automated, computer-based FX trading!

The FX market is ripe with electronic trading opportunity because the markets are so fragmented, unregulated, and a lot of trading isn't electronic at all - so it feels a bit like a trading "gold rush" as firms employ new technologies for FX trading.  My personal experience is with equities-based trading, and today's FX markets feels like the equities market from about 7 years ago.  

The FX webinar will be a short tutorial on how to build an FX system with CEP - specifically, StreamBase of course.  We'll run through the 5 major technology elements of such a system:

1. FX Market Visualization.  Front end technologies that are ideal for displaying aggregated FX market views, algorithmic trading strategies, and integrating the typical client desktop technologies you'll find on an FX trading desk.  In our session, we feature Eclipse RCP technologies.  We've seen RCP take off recently as the open-source, community-based graphical user interface technology of choice with large and small firms.  
2. FX Market Connectivity.   How do you connect to CurrenEx, Hotspot, direct bank market data, etc., and connect to execution venues via FIX or other protocols? 
3. Real-Time Aggregated Market Data.  Creating a consolidated view of the market that can be used to implement FX pricing models, algorithmic trading strategies, or simply visualize FX market data. 
4. Development tools.  To design, implement, test, backtest, debug, and evolve FX trading systems.  
5. Algorithm development.   What tools are best to express FX trading algorithms?  How can you change them quickly?  We'll use a triangular arbitrage algorithm to illustrate.   

Naturally we feature our CEP development tools as the example of how you would build such a system, and show some example of interesting technologies like RCP for client front-end development, and take some questions and answers.  

Hope you enjoy the webinar!

BlueCrest - Why CEP? Why StreamBase?

A short video clip from the head of trading strategy with BlueCrest about what StreamBase means him. Read the case study on how BlueCrest uses StreamBase and Vertica are here.

Turbulent Market Priority #1: An Increased Need to Automate

The "easy" prediction to make about the new #1 priority in the face of economic upheaval would be that cost reduction is job one.  But that's the glass half empty view - firms with an eye on both cost savings AND revenue generation have a different number one priority: automation.

Headcount, not technology, is the top IT expenditure in the banking industry - typically over 40%.  Automated trading provides two big wins:  reduced cost, and increased revenue.  This week's announcement from PhaseCapital is a great proof point.  As Dr. Geoff Goodell said this week - their automated trading system IS their trading operation - it's fully automated. 

So while some firms have retrenched into a navel-gazing state of cost cutting, others have recognized the sudden rise of volatility as a big revenue opportunity.   And low-latency automated trading systems are a key element in seizing that opportunity.  That's why firms use technologies like complex event processing  (CEP), which helps computers monitor thousands of stocks simultaneously and make trading decisions in under a millisecond (one thousandth of a second).

But more than just being fast, the key to winning the trading race is good driving.  Trading expertise often resides in a small number of people:  advantage can be gained by automating the best practices of the sharpest minds in a firm.  This constructive debate within the harsh realities of reduced resources is motivating a new mantra: “People should be paid to think.  All other business activities should be automated.” 

With power comes responsibility.  Some, like George F. Colony, the CEO of Forrester Research, have taken shots at automation in his article called Hal destroys Wall Street.   Likening automated trading to the sentient computer Hal in 2001: A Space Odessey, George argues that computers - not humans - were behind the economic meltdown.   But the computers are not in charge.  In over 20 years, I've yet to see an "unmanned" trading system, or a system that "learns and decides" on its own.  Traders are way too smart for that - they call all the shots.  Automation simply empowers traders to monitor more data, make more decisions, more quickly, and CEP helps them express those ideas more easily.  That's all.  In fact,  we might have been better off if Hal had been involved!

So automation is here to stay on Wall Street, and it not only helps automate trading, it also helps firms manage risk more effectively (as PhaseCapital describes), monitor for improper trading activity while it can still be stopped, and provide more transparency and fairness, not less. 

So increased automation is the first of five new technology priorities in this turbulent economy.