The financial markets are full of nostalgic tales about how deals used to be done on a handshake in the street. Unfortunately—or perhaps fortunately, depending on your point of view—those days are gone. Now, there’s a paper trail for everything—in fact, not just a paper trail, but an electronic paper trail, archived and protected by regulations governing information storage, to make it harder to commit fraud and to ensure that firms can meet any demands for information from regulators.
Soon, we’ll have the US consolidated audit trail, a definitive record of all trading activity on US markets, while exchanges and brokers are already using records of trading activity to drill down into highly granular time intervals to demonstrate execution and latency performance to clients, or (as in the case of Trillium Trading) to identify and address instances of “layering”—where a trader (intentionally or accidentally) places buy and sell orders in the same security, potentially manipulating a stock’s price.
In fact, analysis of granular trade data to assess trading performance played a prominent role in last week’s news, with both OTAS Technologies and broker and research provider ITG releasing transaction cost analysis tools for buy-side and sell-side firms.
With data becoming ever-more voluminous, and analysis becoming ever-more granular and complex, the need increases for tools to help end users get easy access to the data they’re searching for, such as 9W Search’s integration with IBM’s Watson supercomputer to support natural-language processing, allowing users to query structured and unstructured data using free text questions.
However, while—as in these cases—paying close attention to the fine details is a good thing, it can also yield not-so pleasant surprises.
For instance, as exchanges seek new ways to diversify their revenues through new types of data distribution models and licenses, firms not only need lawyers to interpret what they need to pay for, but also to raise awareness among end users to ensure individuals remain compliant with newly introduced usage restrictions. Hence, Ballintrae, which maintains the Ballintrae Exchange Rules and Regulations Database (BERRD), is one vendor whose business is designed to simplify these policies and help firms ensure compliance. The vendor’s new tool, BMAP, allows firms to link their inventory management systems to BERRD, to make compliance easier.
This burden of data fees and license policies—something that new Organized Trading Facility Autilla will doubtless encounter as it moves from a voice-brokerage operation to a fully electronic, exchange-style electronic platform for precious metals trading, with accompanying data services—not only falls to end-user firms, but also to developers building trading-related and analytical tools either for their own use or to commercialize. With this in mind, cloud-based brokerage platform operator Tradier has launched a “Developer Sandbox” that provides free access to much of the data and APIs to develop the first iterations of such products. Tradier officials say that aside from the vendor’s own disruptive cloud model, it wants to support the creation of an ecosystem of innovative and disruptive services around its own core offering.
And speaking of disruption, the small print surrounding a credit arrangement allowed an investor to wrest control of precision instrumentation and latency monitoring software vendor TS-Associates, which has since been placed in administration. Velocimetrics acquired a license to the intellectual property that allows it to sell and maintain TS-A’s products, and snapped up several of the vendor’s key engineers, but the near-demise of the technologies could have cost clients up to 12 months of development to find alternatives or build their own versions from scratch, one source says.
So whether you’re disputing data or company ownership, let this be a sobering reminder that the devil is in the detail, and we should read the fine print.
The founder and CEO of Imperative Execution looks at how trade execution is changing and what that means for the buy side.Subscribe to Weekly Wrap emails
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