FOREX TECHNOLOGY
“Underlying CEP technology provides a means to automatically handle error conditions and thus prototyped models can be safely moved from a QA/ test environment to production,” explains Lovas. “And, CEP infrastructure provides a means to quickly backtest models against historical and live markets to provide proof points as strategy ideas are prototyped.”
New Use Cases
CEP grew up in the algo trading space where it cuts it teeth and where its name is strongly associated. However, CEP benefits in FX have now moved beyond FX aggregation, pricing, smart order routing and algo trading.
“We’ve now got clients using it in a host of different areas,” notes Deacon. “Tis encompasses position keeping, risk management; real-time P&L. For example we have clients using CEP to manage concentration risk ensuing exposures are spread adequately across counterparties, currencies, geographies and alerts are generated when limits are exceeded.”
He adds: “If you’re computing a real-time P&L for more sophisticated products - particularly derivative products, it’s a complicated process as there are a whole series of underlying prices impacting the prices of your derivative instruments. Computing those in real time is sophisticated and exactly the type of activity CEP is competent to handle.”
In the Treasury management space at some of Sybase’s Tier-1 bank clients, CEP is being used to help monitor real-time funding and treasury management operations. Deacon says: “Tey’re doing it by currency down at the most granular transactional level and reconciling anticipated transactions with actual transactions.” CEP sits in a “non-intrusive way” alongside existing systems monitoring the flows and providing real-time cash management.”
CEP is the “quintessential real-time platform” according to Lovas. Often firms have their own ideas on how they want to calculate specific information for working orders; Positions: Open, Closed, Net and Profit: Realised, Unrealised. In the past, vendors simply coded these by hand in traditional languages and any changes had to wait for the next release.
One new area where CEP is being applied is in the transaction cost analysis (TCA) space. TCA shares many of the same technical challenges with algo trading. Analysis of orders and executions against multiple markets need to be accomplished in real-time. Resulting strategies can be fine-tuned to improve alpha.
102 | april 2012 e-FOREX
Nick Deacon
“What you get with CEP is the ability to step outside of the standard functionality provided by your EMS. If you want to build and continuously refine your own execution algorithms or generate your own signals which drive your trading activity, then CEP gives you that flexibility.”
Regulatory Change
Commenting on how CEP can assist market participants address new regulatory compliance requirements in the FX trading space, Deacon says: “What CEP brings for those firms struggling with some of these new regulations is the ability to have a platform whereby they can rapidly iterate upon to develop, enhance and modify their reporting requirements.”
“It’s that ability to say ‘I’ve got a new requirement and I need to add that into my existing regulatory infrastructure’, by just bringing that in as a separate module - without impacting the rest.”
Conclusion
Lovas summarises by saying: “A trading firm’s final goal is to win, to be successful in outpacing the market and the competition. CEP technology is an effective means to achieve that end allowing institutions to be more nimble and cost effective by responding to the constantly changing market and regulatory landscape. Leveraged by IT staff or the business itself, CEP tooling is approachable by non-programmer types as the basic metaphor is to assemble semantic logic for strategies, TCA, or risk in a graphical modelling environment.”
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