The StreamBase Event Processing Blog

City Index and Curex Adopt StreamBase CEP

More good news for StreamBase (video overview) and the event processing space - this week, two firms went public about their selection of StreamBase and CEP: City Index and Curex. The theme of these selections is rapid time to market and low-latency, and it's the consistent theme of recent StreamBase selections by CME Group, Kairos, CMC Markets (a former Apama customer), RBC, BNY ConvergEx, BlueCrest, and PhaseCapital.

One of the best-known brands in Europe, City Index, announced their selection of StreamBase as their CEP platform. City Index offers investors real-time access to prices on markets around the world and flexible ways to trade on price movements in financial markets including equities, indices, currencies, commodities and interest rates. StreamBase will be used by City Index initially to develop pricing applications that lie at the heart of their spread betting infrastructure.

“We evaluated both CEP platforms and specific off the shelf products in looking for a solution that offered rapid time to market, high performance and ease-of-use for our pricing applications,” said Toby Young, CTO at City Index. “Our team found that StreamBase combines the best of both worlds – we can deliver just as quickly as with an off the shelf product, but with StreamBase we have full control over the functionality and the flexibility to extend its use into other areas of our production environment. Our choice was cemented by the excellent performance of the StreamBase engine. This, together with the time to market and control that StreamBase provides, is a winning formula."

Curex's Bill Dale said this: “StreamBase meets and exceeds Cürex’s criteria for an ultra low-latency stream processing platform that enables rapid time-to-market and provides a customizable development environment as well as pre-built connectivity to multiple sources of real-time data,” said William Dale, CEO, Cürex Group. “For Cürex to lead the FX marketplace we must ensure we are developing FX trading technologies that will remain competitive in the future. This means our technology infrastructure must be built with best-of-breed solutions such as StreamBase that can be rapidly modified in response to tactical and structural changes in the FX market. With StreamBase we can update and test new algorithms in hours versus the days or weeks required by other solutions and this enables Cürex to quickly react to the ever changing needs of the market.”

We'll post more information as it becomes available here about these important use cases of CEP as it becomes available, just as we did with the excellent Q&A session with the CIO of CMC Markets. Congratulations once again to the StreamBase team for these public and important references.

Why the CEP Tide Has Turned Toward StreamBase

Last week, CMC Markets announced that they switched from Apama to StreamBase as their enterprise-wide event processing platform. As FXWeek reported, CMC “initially spent three months deploying a similar system from Apama, but dropped the deal in favor of StreamBase.” As a firm that trades over $1.4 trillion a year, CMC’s decisions about their infrastructure are not taken lightly. So their decision gives us pause to ask: why the switch? 

Asif Adatia, Chief Information Officer for CMC, described their decision like this: “the ease of development for both financial engineers and technical engineers, the performance, and scalability of the platform were our key criteria.” Let’s examine each part of that statement.

1. Demonstrably better ease of use. You might think that the efficacy of a development environment would be a subjective call. In some ways, it is - when it comes to the visual esthetics of a tool. On the other hand, usability is often the driver for market-altering innovation - profound shifts in the accessibility of a new tool can suddenly unlock barriers to innovation. The change in the last 10 years in finance has been profound. 10 years ago, algorithmic trading wasn't even named, now 70% of the U.S. equities trade execution happens algorithmically. In their report "The World According to Quants: Enter Alpha Generation Platforms", the AITE group reported that certain trading algorithms have a shelf-life of less than 3 months. In the face of all that rapid change and ephemeral opportunity, the ability to quickly build real-time trading infrastructure (algos, execution, risk, compliance, pricing, TCA, surveillance) is a matter of survival.

Firms like CMC, CME Group, and RBC didn't choose StreamBase for its aesthetics, they chose StreamBase because its graphical development environment gives them a fundamental competitive edge. The tools aren't just easy to use, they allow business users and engineers to work together because the language of StreamBase matches the way they think. The StreamBase dataflow language was designed from the beginning to program event-based systems the way you would draw them on a whiteboard, and the proof lies in what customers say, as Adatia told FX week, “Our financial engineers find it really easy to put the models together.” 

And this ease of use delivers another critical innovation: firms get this usability and time to market advantage and the performance benefits of event processing - at the same time. StreamBase isn't like other CEP tools that make the developer resort to low-level programming to make the system perform and scale. Relieving the user from the burden of thinking about plumbing was described by Adatia to A-Team Insight “[CMC] create their models readily, without resorting to code-level programming.” PhaseCapital reported that they built their trading system with StreamBase in 4 months rather than the 4 years it would take to build it with traditional development tools and they change their strategies every day. These are not subjective opinions about aesthetics, they are qualitative and quantitative testimonials to the innovation that StreamBase's interface can provide.

2. Built-in performance you can see. On Wall Street, milliseconds, and microseconds matter. CMC switched to StreamBase because they wanted the fastest engine they could get. 

StreamBase was designed for speed from the very beginning. Release 1.0 in 2005, was designed to take advantage of modern hardware, from the multi-threaded server to the StreamBase language which produces highly performance applications without burdening the developer. The StreamBase language plans performance like a database pre-processor plans query optimization. In 2007, StreamBase engineers broke down another barrier with a straight-through event processing compiler. Recently, in 2008, direct bytecode generation optimization took the StreamBase performance innovation even further ahead of all other CEP platforms.

When performance is something you can see, it's a remarkable result. CMC said it this way: '[we don't talk about our specific latency numbers publically, but the performance is] good though and you can compare us on FX pricing to a bunch of our competitors.  And you will see our performance is noticeably better at times. Absolutely."  The world's largest electronic futures and options exchange in the world, CME Group chose StreamBase after using performance as a critical selection criteria, because they process over 11 million trades a day.

3. Scalability to grow. You might assume better scalability means StreamBase-based applications can be run on multiple CPU cores, and that’s true - better use of hardware means CMC needs less hardware. CMC described that their StreamBase system easily handles "More than twice the real-life peak rate for price ticks encountered so far.”  

But better scalability isn’t only about increasing volumes - it’s about ease of management, ease of customer support, and the ease with which high performance and scalability can be attained by developers.

And scalability is also about expanding usage. Apama established early on algorithmic trading as an important use case for CEP. But now, as CEP's use explodes into new application areas, firms are looking more deeply at how easy it is to build their second, third, and fourth applications. Just last week we had a call with a customer who guessed they had deployed "about 100 StreamBase applications." 

And now we have come full circle back to the StreamBase development environment. Our mantra is to “deliver high performance and scalable applications without having the developer think about performance and scalability.” Streambase makes performance native, which is one more reason it is unique.  

CMC is not alone. Organizations that are adopting StreamBase CEP are seeing these same benefits in ease of use and performance. CEP is the disruptive technology that frees their engineers to focus on creating business value instead of plumbing. CEP empowers their business analysts to work with the actual software instead of wishlists and design documents. CEP allows the whole organization to be more agile, to deploy changes to their infrastructure faster, and to take advantage of new opportunities ahead of the competition.

Q&A with CMC Markets: Trading $1.4 Trillion on CEP

This week CMC Markets announced that they have deployed complex event processing (CEP) in their global trading infrastructure that processes $1.4 trillion a year on over 5,000 trading instruments, on over 115,000 trades a day. 

You might be thinking - $1.4 trillion in trading? Who is this CMC Markets? CMC is the leading global provider of retail contacts for difference (CFDs) and one of the largest financial spread betting leaders. CMC is a sophisticated, distributed organization - according to Inside Market Data, "the StreamBase platform is being rolled out across CMC's global operations, including offices in Australia, Canada, China, Germany and the UK, and is supporting a wide range of applications including its market-making, risk management, and hedging tools to support trading in FX, indexes, futures, commodities, and equities."

This kind of global, mission critical commitment to CEP is important news, so we spoke with CMC’s Chief Information Officer, Asif Adatia, to find out more about CMC, their needs, why they chose CEP, their business results, and their future plans with CEP.

Q1: The AITE Group report from July, 2007 said your average trade volume was about $100 billion monthly.  Is that correct now?

That’s an old number. Now we’re at about $200 billion a month or $10B a day.  For example, if I look at today’s stats we’ve done $7.5 billion now at trading shops.

Q2: Have your trading volumes increased a lot over the last couple of years?

I think all of our stats have increased.  We’ve got more clients, more trades per day.  Which explains some of the re-architecture work we’re doing.  Yeah, we’re doing very well at the moment.  This business fundamentally is doing very well from a key metrics perspective.

Q3: Right.  Can I ask were your upgrade plans hampered at all this last year by the recession or have you been able to carry on?

Peter Cruddas, our CEO, gave us massive support from a technology perspective.  If anything I’ve got more to do. We put a plan together, the board bought into it and it’s pretty exciting.  For me it’s phenomenal, we’ve been able to do everything we wanted to do.  This re-architecture is an effort to take our business to another level.

Q4: So there hasn’t been anything that had to be put on hold because of the crisis?

No, definitely not from a technology perspective, no.  If anything, the question is “can I do more and get it done faster.”  I’ve certainly not had restrictions.

Q5: This re-architecture is replacing your existing in-house built architecture.  What other technology upgrades are you making?

We’ve got a whole style change from our front end and our transactional engines to our back office.  There’s a program over the coming months where we are upgrading all of our systems.

Today, StreamBase is doing pricing, and it’s far more sophisticated than our legacy market maker platform we previously had.  Ultimately, StreamBase will replace a lot of the intelligence behind the old system.

Q6: Can you give me a couple of examples?  And over what period you will conclude?

So the back office as an example, we started to work on that. We’ve got a batch orientated back office currently, and we’re in the process of creating a real time P&L and cash balances being realized in P&L.  Today you wait until the end of the day, you mark the market and you adjust your P&L’s and you realize your P&L then. We’re moving a real time back office.  The timing is probably end of year. And then again because it’s so different, there will be a coordinated effect with our marketing and our client service guys.  Because it is a big difference from the way we have been working. That’s just one example of many.

Q7: Can you describe the project StreamBase supporting?

StreamBase supports FX for all of our major currencies, exotics, as well as forwards.  It will support indices futures, futures on indices, cash commodities, treasuries and equities, single stock.

Q8: Can you describe how the StreamBase application processes data and pricing for CMC?

We cleanse our prices as they come through. We get multiple feeds from various brokers.  We cleanse our prices and we’ve got a reasonably sophisticated model where we look at groupings - if there are multiple feeds coming in and you want to take the best price, you want to take out the ones that are outliers. So the mathematics behind are sophisticated - it doesn’t just do a standard mean, it takes a look at standard deviation of all of these prices and then looks at the volatility over multi-factor, high frequency scenarios. Then we start to look at which ones are outliers.

As I said StreamBase helps us look at what’s happening and very quickly take algorithms in and out - fix them and put them back in as well.

Q9: What are your FX market data sources?

I can’t give you the names but it’s primarily the usual suspects.  Tier one brokers provide liquidity and pricing to firms like ourselves.  We’ve got quite a few brokers that we deal with and their price feeds. We’ve also got feeds for other asset classes.  And along with the brokers, we have multiple data feeds from vendors, exchanges, alternative ECNs and OTC price providers

Q10: Are you using the StreamBase adapters to connect directly to those price feeds?

Yes, it’s actually is a combination.  StreamBase provides feed handlers.  So very quickly we were able to connect and use the StreamBase feed handlers. And then we’re in the process with some of our brokers, again, StreamBase allows us to connect to our own feed handlers so we do that.  So as I said at the beginning flexibility was one of the key criteria.  StreamBase offers that to us as well.  So we can mix and match.

Q11: Are you live? 

Yes, we’re live now.

Q12: You mentioned scalability and performance - what kind of demands are you putting on the StreamBase system now?  I’m thinking updates, latency, that kind of thing?

So at the moment we’re able to process 17,000 ticks per second on FX.  It doesn’t really hurt the system or the processes that much.  And we’ve got it scaled up to for twice as large as that. Can it handle our peak? Our peak to date has been nowhere close to 17,000 at the moment.  We’ve got what we call a non-functional regression test environment where we just overload it.  We overload our environment and haven’t broken it.  We got so much going on right now that if it can cope with double our peak, we can focus on other things.

Q13: So what kind of a different will users notice?  What’s going to be different for them? 

If you look at FX pricing live right now our spread is pretty much in line and competitive.  We used to have an issue back in before we implemented some of this.  We used to have issues with latency.  Those problems have disappeared now.  We’re able to process a lot more - about 17,000 ticks a second, which is pretty cool. We’ve still got plenty of headroom as well.  And we’re also now taking multiple feeds in.

From a usability and user experience, clients will just get better pricing, no re-quotes as we roll this out across all of our asset classes.  Re-quotes will disappear, type of spreads, better spreads.  We’re able to handle volatile markets - fed announcements; all of that kind of stuff is no longer an issue for us. We’re probably one of the few retail players out there that if you’ll notice during any highly volatility period, CMC markets are usually there providing two way quotes.  So that, I think, is the upside for clients that our infrastructure is solid in times of high volatility.

Q14: Can you describe two way pricing?  It’s one of your differentiators right?

The ability to quote a two way price is not the issue - the ability to quote and allow you to trade at that price is the difficult part and our systems can do that - especially for FX, as we add more asset classes to our new infrastructure we should be able to do the same for all asset classes, hence the urgency to get everything done yesterday.

Q15: So what makes your pricing better?  Is it just the lower latency?

I think it’s a number of things.  Yeah, it’s latency, it’s flow. It’s lower latency, robust feeds, and having multiple feeds coming in.  The result is to offer the retail client almost institutional pricing, which is unique.

Q16: Can you put your latency improvements in numeric terms?

We’re able to handle 17,000 ticks per second from multiple sources.  Previously we looked at probably 3000 ticks per second.  This doesn’t make a big difference during normal trading days,  but when it volumes start to pick up - and this is only one asset class - we’re able to process this number of ticks and still be able to provide a two way price, a clean price you’re able to trade on in milliseconds.  That’s the upside.  Market data is a big issue for all the vendors - even the big players out there.  I won’t mention any names but during summer last year you will notice that there were massive delays in all of the larger players out there with respect to providing prices to clients in general.  And, again, we believe that now those kinds of delays have disappeared from our architecture.  So can I quantify the number of ticks per second?  We can handle the latency that we’ve got, yes, but it’s an improving target.  And one where, because of the StreamBase multi threaded architecture, we can run it across multiple CPU’s now.  If we ever get a bottleneck we just plug in another blade, pull up another service, and we get better latency and better pricing.

Q17: So the scalability is obviously great. Do you have any metrics you want to offer that quantify the latency you’re experiencing?

No, we don’t give them out. Speed is a strategic advantage for us, so we think those numbers are competitive information.

That’s all right, fair enough.

It’s good though and you can compare us on FX pricing to a bunch of our competitors.  And you will see our performance is noticeably better at times. Absolutely.

Q18: Okay.  You mentioned initially in the beginning the broader investment in your architecture.  Is that correct?

Yeah, we are in the process of rethinking a lot of our systems and our core systems at the moment.  This is just part of that.

Q19: What other applications will you use StreamBase for?

Yeah, the flexibility of the platform is the key thing for us.  There are lots of ideas - for example, surveillance.  Again, the concept behind surveillance is that you want to process a large number of trades and constantly be able to look at patterns. From what we know of StreamBase, it could lend itself well to that.  But, again, we’re going through pricing first then risk - the classics.  We’ll do the classics first and then all the other added value things we may want, because we have the infrastructure in place now.

Q20: And when you say when you look into the future you might use it for surveillance purposes, what that be looking at for clients?  Or is that more for looking at potential opportunities that you might have been missing or is it a bit of both?

It’s a bit of both actually.  Surveillance is a broad area. One of the things we do is look for people behaving badly. So you want to be able to protect the firm from people doing financial fraud.  You want to be able to stop fraud before it happens because you want to be able to flag that in real time.  StreamBase will be capable of that as well.  So there’s a number of projects, again, that we would look at after we’ve done the basics.

What makes this possible is that because the StreamBase infrastructure is there, the tools are there, the adapters are there to feed the platform. Then it’s a matter of just gluing it together.

Q21: Right, okay.  Very interesting.  Are you going to then be incorporating this into your market maker platform?  That’s the trading platforms that you guys have.

Yes.

Q22: So this is deployed across your entire enterprise?

Yes, it is global deployment.

Q23: How long did it take you to deploy the system?

6 months.

Q24: What were your requirements when you were looking for a solution and why did you choose StreamBase? 

We wanted two things: a scalable solution, and a flexible solution.  We’ve got a bunch of financial engineers that want to be able to prototype or even test different models and scenarios.  And we wanted that to be as easy as possible, so ease of use was a big part of the criteria. 

Q25: So you selected StreamBase CEP over other CEP products for its simplicity of development, performance, and scalability.  Is it working?

Yes - the flexibility of StreamBase is key to us - so much so that we’re finding new uses for it.  We originally brought it in for pricing and risk, and now that we understand the concept and some of the things it can do, it should facilitate other projects as well.

Q26: Can you talk about performance - was that about latency or capacity management?

With performance it was a combination of things.  A number of ticks, as you are probably well aware of market data, isn’t going down.  So it’s the number of ticks you can process and how you can scale across multiple different environments.  It’s the number of different feeds you can then handle.  That was part of the criteria. 

And then it was the ease of managing all of that performance infrastructure.  Clearly there are definitely products out there that can do some of these things, but it was the combination of speed and ease of use that was critical.  And at the end of the day for us, the overriding factor actually was the financial engineers signing off, because they could participate in the process and work with the StreamBase tools.  They felt we can make this product work for us.  We like this product.

Q27: When you were doing an evaluation of different CEP platforms, what did the evaluation entail?

There was performance, scalability and ease of use and how our financial engineers found the products in general.  So when we did look at the other guys, one of the nice things we liked about StreamBase was the development environment, StreamBase Studio.  The Studio environment is intuitive; it allows the financial engineers put models together. It’s graphical. You can connect it together quickly.  It’s quite novel and we like that. 

So StreamBase had to meet both the technical requirements as well as the financial engineers’ requirements.  And StreamBase met both those needs quite well.

Q28: You mentioned that you initially used at Apama.  Why did you drop Apama? 

As I mentioned, the ease of development for both financial engineers and technical engineers, the performance, and scalability of the platform were our key criteria. We dropped Apama because we liked StreamBase better from all of those criteria.

CEP in Brazil, Breaking New Speed Barriers

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.

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.

 

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.

5 Observations about PhaseCapital's Selection of CEP

PhaseCapital, a Boston-based “quant” investment adviser, announced their selection of StreamBase as their CEP platform.  There has been a lot of interest in this announcement, for many reasons (e.g., here's the front-page coverage in Inside Market Data (warning:  IMD is password protected)). I was involved in some of the interviews with Eric Pritchett, CEO of PhaseCapital, and there were 5 especially interesting things that struck me:

1. Increased use of CEP as infrastructure.  PhaseCapital uses StreamBase at the heart of their high-frequency, low latency trading infrastructure.  It's a better way to build event driven systems, as Eric was quoted in the IMD interview:  "StreamBase technology allows PhaseCapital to abstract the rest of its trading architecture from the feed handlers themselves, enabling the firm to make changes to its data without having to re-engineer other parts of the system."  In the past year, we've seen an increase in firms deploying CEP as event-driven application infrastructure, rather than an embedded component of, for example, and algo trading application. 

2. Expansion of CEP use cases.  PhaseCapital's application of CEP is very broad - it's at the heart of their portfolio management system and risk engine, for U.S equities, futures, and equity options.  They use it for market data management of multiple exchanges to their trading system, and to order state handling and smart order routing. OK, I'll quote myself on this one:  "CEP isn't just for algorithmic trading anymore."  It's becoming a key part of enterprise infrastructure.

3. A comprehensive customer-driven CEP product evaluation.  PhaseCapital performed a comprehensive evaluation - they installed and tested "all the major CEP products," and ran real use cases against the products.  They looked at language, performance, usability, tools, and scalability of the CEP architectures.  Eric summed it up nicely here: "Our team consists of scientists and professional engineers; we are techies at heart, so we appreciate the value of a well-designed system that supports our development and deployment philosophy."

4. The continued rise of the need to automate.  In the article The Five New Technology Priorities, I wrote about the first priority:  automation.  In one interview last week, Dr. Geoff Goodell, who ran the evaluation, described how critical CEP is to their company:  "We're a small team of 15 at PhaseCapital - this CEP-based system IS our trading operation - everything is automated."  I think the need to automate systems is at the heart of StreamBase's recent growth - firms need to do more with less.

5. StreamBase:  the new market leader?   I've spent almost a year watching CEP evaluations play out from StreamBase's side and I'm starting to observe patterns of who's winning business and why.   In just the last six months, there's been a shift - publically, StreamBase has scored wins with BNY ConvergEx, RBC Capital Markets, BlueCrest, and now PhaseCapital.   That's more customer wins than all the other CEP vendors combined in the same period.   What's going on?   It seems to me that the field is separating into "first generation" and "second generation" CEP.  For example, most of Apama's attributes are first generation (single threaded server architecture, unmaintainable code generation for their CEP language, non-SQL oriented language, lack of debugging tools, and an adapter architecture that adds unacceptable latency due to its heritage of having CORBA embedded).  Need proof?  As Dr. Goodell described, Apama didn't even make the first cut in their evaluation.  On the other hand, Aleri was the other final CEP product in PhaseCapital's evaluation, partly because they fared well relative to Apama because of its multi-threaded server architecture. 

The real test of a market and products aren't what the vendors say about their product;  it's what their customers say about their product, and it's exciting to see the CEP landscape and buzz about new applications, new industry trends, and new product category leaders as the market continues to grow.

Case Study: BlueCrest Capital Management

Motivation for Real-Time Market Data Management

BlueCrest Capital Management is a leading European hedge fund, based in London, with over $15 billion in assets-under-management and an award-winning reputation for combining ‘technology, diligence and innovation to produce the most efficient risk-taking possible’.

Since its launch in 2000, BlueCrest has aimed to stay ahead of the curve by anticipating future challenges and investing early in skills and technology. The firm’s traders are highly technical with many trained mathematicians. Complex statistical models form the foundation of some of its trading strategies, and these rely on a rich variety of data-feeds to enable them to trade “anything that ticks”, as their Head of Trading Strategy Systems, Justo Ruiz-Ferrer describes it, adding, “We trade everything from traditional fixed income, equities, FX and related derivatives, to exotic commodity, energy and alternative asset classes.” In such highly competitive markets, BlueCrest soon realized that good data management was as important as their quantitative models. “You may have a Ferrari, but if you fill up your tank at the supermarket, you won’t get the performance,” observes Ruiz-Ferrer.

Scalability and real-time performance were key factors with BlueCrest’s data storage demands exploding at 200 to 400% per year, and exchange based derivative markets hitting new highs of billions of price ticks per day, not to mention the OTC platforms, as ever more robotraders enter the jittery markets.

A New Market Data Management System

In 2007, just as the credit crisis was breaking, BlueCrest set up a team under Justo Ruiz-Ferrer, to develop a state-of-the-art market data management system.  BlueCrest trades 24 hours a day, six days a week, across multiple markets using a wide range of data feeds.  As markets move day to day and week to week, BlueCrest needed to rapidly reconfigure data feed connections and plug the data into real-time models while optimizing management of the necessary data feed licenses. BlueCrest devised a solution that combines the rapid time-to-market event processing capabilities of StreamBase with the instant storage and retrieval functionality of Vertica. It provides a total market data management solution that is able to meet the needs of low-latency trading and the demanding innovation of their quantitative analysts to achieve greater profitability.  As the range of data sources constantly grows with increased cross asset class and exotic derivatives, time to market, low latency and auditable compliance with complex data licensing rules were essential.

Ad hoc engineering of new data feed adapters had proven to be both expensive and risky due to complex software interfaces, few standards, and low reusability of components. The new system therefore aimed to decouple users from the data sources to create a common interface for accessing, conflating, enriching and distributing real-time data with minimal latency and assured compliance. Yet it also had to encourage flexible data sharing across the firm.

BlueCrest’s new market data system provides both current and historical snapshots and on-demand event processing for both simple requests like last price traded to complex scenarios like volatility surfaces or correlation signals with time windows. It also has to guide the user through the rich jungle of data sources and compliance rules, and help resolve queries that may have alternative solutions across the data providers. Each source and derived data-object needs its own access controls, as these cannot always be inferred.

Market Data Mechanics

The system was built in three layers: (1) An event layer that includes the data sources and a core event-processing engine from StreamBase to extract, collate and enrich the source data; (2) The storage layer consists of a real-time, historical tick database from Vertica, backed up on disc, and a last tick store for last known value (LKV) caching; while (3) the control layer includes compliance and management components written in-house in C#.  The control layer checks user access permissions, retrieves data from the storage layer or activates data streams and then dynamically sets up ‘Collectors’ to relay the resulting ‘event-curves’, such as volatility, yield or momentum curves to all subscribed users or their software applications. The whole system is driven by real-time requests from the users or their software models.

Data streams fuel the system. Ticker plant and internal messaging buses feed data to the StreamBase complex event processing engine to clean, normalize, filter and enrich the event-curves. As part of this enrichment, StreamBase can mix real-time events with the historical data in Vertica as needed to evaluate the complex rules, yet still keep pace with the input data rates. StreamBase then forwards the new event curve objects to both Vertica for storage and the Collectors in the control layer, which encrypt them to ensure compliance, cache them in the last tick store, and distribute them to all waiting user processes. Whenever any point changes, StreamBase generates a new event, and therefore provides a stream of event curves rather than just data points. “It’s immensely powerful given the high speed inputs and the complex handling requirements,” says Ruiz-Ferrer.

The system works round the clock six days a week supporting user services across different geographical locations. Further servers with collectors, local caches and control software are also located in each office to minimize latencies for last value type queries, which represent the bulk of the workload.

All the core data feeds are now plumbed into the system including the major data aggregators and many direct exchange feeds. However, much of the data actually comes from internal BlueCrest services over the messaging bus. “We can subscribe to everything,” says Ruiz-Ferrer, “so we load tested to ten times the whole feed, just to be safe.”

Security is tight, hence the encryption, which is the most expensive component in terms of CPU resource, according to Ruiz-Ferrer. Moreover, the system keeps track of who is accessing which service at any time to ensure compliance with the licensing rules. One advantage is that BlueCrest can optimize license fees to maximize sharing when data is not in use. “What a user sees depends on the market data licence. Without the licence, users only see limited price movements, whereas with the license they see everything,” explains Ruiz-Ferrer.

In London all the processes run on a single blade server to eliminate network hops. Each layer of the architecture can be separately scaled across its own set of server blades to meet changing performance and resilience needs. Thus the whole sequence from real-time source to waiting user servers in London takes under 20 milliseconds on a benchmark test of 2 million updates per second with very low server loadings.

For the middle office and research models, the priority was to leverage the full knowledge base of the firm with great flexibility and rich functionality rather than minimizing microseconds. Indeed the core StreamBase component can typically be completed in well under a millisecond, but complex enrichment and security do add some latency.

Rapid Time to Market

The project build started in January and by May it was in production, even allowing for a one-month delay due to other priorities. The team now is working to port other data feeds and analytics to StreamBase, enriching the visualization tools, as well as making the whole system fail-safe with a high speed interconnect to the back-up site.

Prior to the market data management solution it could take 2 months or more to add and integrate a new data feed. Now a new service is connected in just two weeks because everything is standardized. “This makes the whole business much more responsive and confident,” says Ruiz-Ferrer.

Having evaluated many other solutions, the BlueCrest team chose StreamBase because of its real-time performance and flexibility, with many adapters available out-of-the-box for connecting to data feed handlers, messaging and data base systems including Vertica, and trading platforms. They found the visual workflow-like design capabilities of StreamBase particularly helpful for rapid development and maintenance.

“StreamBase and Vertica have allowed us to develop our market data environment rapidly with a sound run time behaviour, excellent extensibility and minimum effort”, concludes Ruiz-Ferrer. “By investing in a high-speed data storage and an ultra low-latency complex event processing solution, BlueCrest has ensured that its vital market models get the highest octane data mix available to stay ahead of the pack and negotiate the market chicanes at full throttle.”   BlueCrest has demonstrated once again how innovation can meet the challenges of the rapidly evolving global capital markets. 

About Bob Giffords
Bob Giffords is an independent banking technology analyst based in the UK, who carries out research on the global evolution of the global capital markets. Following a long career in systems development and consulting to the finance sector, he was CTO for a leading bond trading platform in Europe. He is now a frequent speaker at securities industry conferences and writes for various industry journals including The Trade, Waters, Dealing with Technology, Swift Dialogue and Financial World. He can be reached at bob.giffords@btinternet.com.

About StreamBase
StreamBase Systems, Inc, a leader in high-performance Complex Event Processing (CEP), provides software for rapidly building systems that analyze and act on real-time streaming data for instantaneous decision-making. StreamBase’s Event Processing Platform(tm) combines a rapid application development environment, an ultra low-latency high-throughput event server, and the broadest connectivity to real-time and historical data and leading EMS/ OMS software platforms. Six of the top ten Wall Street investment banks and three of the top five hedge funds use StreamBase to power mission-critical applications to increase revenue, lower costs, and reduce risk. It is also used by government agencies for highly specialized intelligence work. The company is headquartered in Lexington, Massachusetts with European offices in London.  For more information visit www.streambase.com.

About Vertica
Vertica Systems is the market innovator for high-performance analytic database management systems that run on industry-standard hardware. Co-founded by database pioneer Dr. Michael Stonebraker, Vertica has developed grid-based, column-oriented analytic database technology that lets companies of any size store and query very large databases orders of magnitude faster and more affordably than other solutions. The Vertica Analytic Database is available as software only, as an appliance or online as a cloud computing solution. The technology’s unmatched speed, scalability, flexibility and ease of use helps customers like JP Morgan Chase, Verizon, Mozilla, Comcast, Level 3 Communications and Vonage capitalize on business opportunities in real time. Vertica is headquartered in Billerica, Mass. For more information, visit Vertica.com.