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The global financial markets are facing perhaps the biggest technological cycle in its history, with the growth of faster technology and the advent of cloud and now new data mining tools. JLN’s Jim Kharouf spoke with Drew Shields, chief technology officer at Trading Technologies and Julie Armstrong, executive director, global head of market technology services at CME Group about the latest trends in data and how that is reshaping the industry.
Armstrong said that the industry trend may be toward a common data format, or even a central data repository that firms can draw from.
“I think people are looking for one-stop trading, one-stop data,” Armstrong said.
For Shields, the technology evolution is bringing together more flexible structures whereby firms are now using the cloud for one part of their trading and research activities and then co-location services for execution. This slow track with big data, which is now merged with fast track high speed trading is what will drive new trading innovations going forward.
“Now, people who are looking to execute in a low-latency manner are doing it based on models that rely on big data, machine learning and that sort of thing,” Shield said. “What you really don’t want is to process data in the co-lo, so inevitably you’re leveraging flexible infrastructures like cloud technologies to do that. That move toward data being the driver for trading is requiring that you kind of integrate a variety of technologies to make it as simple as possible.”
What has also evolved is the acceptance of cloud technologies by major banks, brokers and technology firms in the industry. Armstrong said just three or four years ago, many major players in the market were not interested or trusting of cloud services.
“We’re seeing people get more comfortable with it,” Armstrong said. “And at CME Group, we’re right now actively researching more data delivery in the cloud to see where the market will go. It’s application management. It’s computational power. It’s storage. “
This more dynamic use of the cloud is what is pushing more firms to adapt it into their overall technology strategies. McKinsey & Co. reported that application development on the cloud could reduce launch times from 89 days to just 15.
For Shields the key aspect of the cloud trend is about balance.
“To me, it’s about balancing speed versus scale,” Shields said. “When you really need to scale data backtesting, you really don’t want to do that on a bunch of bare metal stuff that you’re managing and maintaining, and then really as much as possible, put your dollars to work where latency matters.”
If cloud technologies are the warehouse, delivery system and analytical warehouses, data is the gold within it. This push into identifying patterns and utilizing other forms of data to make decisions is a global economy phenomenon today from trading to selling beverages.
“Everyone realizes that getting edge out of squeezing nanoseconds or microseconds out of trading decisions is getting more difficult,” Shields said. “So the next edge is going to be being able to process larger amounts of data to see signals that other people can’t see.”
From the CME perspective, it will continue to build out its data offerings to end-users. The exchange has been pushing forward with relationships with third-party data providers of so-called alternative data, which offer fundamental data sets on everything from satellite imagery of corn, soybean and wheat fields to crude oil storage and shipping data.
“We’ll be resellers of alternative data, which we see as becoming a very big trend coming down the pike for many trading firms,” Armstrong said.
Shields added that the more exchanges can aggregate and democratize data, the more it can open markets to additional participants, especially those one, two and three person trading operations.
“The more we can make it accessible to those groups, I think you will see another exciting evolution of democratization, leveling the playing field, and giving those small groups which I think are really critical not just for the industry but certainly for Chicago, it’s going to give them a chance to thrive again.”
Armstrong and Shields agree that the data scientist job pool will continue to be very competitive as every industry looks for talent in that sector. The industry also will continue to look for professionals with strong skills in the C++, HTML 5 and Java.
Given the demand for data and integration of data into trading, firms are still working on how best to provide mobile services as part of their offerings. TT offers mobile trading and connections to accounts. But they are faced with the physical world problem of what do you offer a trader who is used to eight monitors on a desktop?
“For the most part (mobile) is about being aware of markets when you are not at your desk,” Shields said. “I think where it will become a more interesting is when we can do a little more on the data reporting on the post-trade analysis side, where we can be delivering summary data and analysis to people on mobile.”
Shields said that one of the things they are looking to do is bridge the gap between the desktop and mobile applications, so customers can choose or customize the data and functionality they want on a phone.
“One of the things we’ve been working on lately is trying to bridge the desktop app and the mobile, so that things you do, the way you arrange data in one can be accessed by another,” Shields said.
Armstrong said it still has a ways to go in terms of what content is in demand from mobile technology, as well as their own comfort level of doing something critical via phone or tablet.
“There are still compliance issues from firms who say “No mobile,'” Armstrong said. “That’s a reality for some firms.”
But as CME Group and others look for more customers, particularly in Asia, they see a growing demand for products that are mobile friendly. The level of trading and sophistication using mobile platforms is something all firms will have to think about and address.
While data is grabbing attention of market users, cybersecurity is also equally top of mind. Shields and Armstrong said the security issue will continue to be a concern and a major focus for their firms. A recent Duff & Phelps survey of financial services firms showed that 86 percent of financial firms surveyed plan to spend more on cybersecurity this year.
Shields said cyber is critical, of course, but in terms of new investment the company is focused on extending its data services. Last week, the firm announced the acquisition of Neurensic, an artificial intelligence and machine learning firm that is focused on compliance. TT has said it could expand that technology to include data and trade analysis as well.
“Finding ways to take a customer data and give it back to them in new forms, new metrics, new ways of evaluating their trading decisions and evaluating risk, is where we’re going to be making an investment in the future,” Shields said.
It’s a big time for big data.
Want to see just one section of the interview? Click on the detailed segments below
Deep Dive Short: The Cloud
The industry has adapted to the cloud. The question now is what can you do with it? Drew Shields and Julie Armstrong talk about what it’s good for and how firms are tapping into it for new trading strategies.
Deep Dive Short: Big Data
It is the buzz word for the industry – data. Julie Armstrong and Drew Shields talk about the growth, breadth and opportunity for firms in the data space. They are looking for new data sets and news ways to deliver it.
Deep Dive Short: Mobile And What’s Next
Given the demand for data and integration of data into trading, firms are still working on how best to provide mobile services as part of their offerings. Julie Armstrong talks about cybersecurity and Drew Shields discusses the focus on new data offerings.