Managing Big Data After Brexit

Managing Big Data After Brexit

Ivy Schmerken

Editorial Director at FlexTrade

Views 1150

Managing Big Data After Brexit

05.08.2016 08:30 am

After the UK’s June 23 referendum to leave the European Union, traders and investors awoke to a global sell off in stocks, a surge in U.S. equity trading volumes, and volatility in foreign exchange rates as the British pound sterling fell to historic lows against the US dollar.

Despite the uncertainty, U.S. stocks – the blue-chip Dow and the S&P 500 — recovered and hit new highs since then. Yet investors are still wrestling with concerns about the global economy and the fallout from the UK’s decision to leave the EU.

In a global, interconnected market, Brexit reminds firms that IT systems must be prepared for shocks to the financial system.

Alexander Tabb

“Brexit is the perfect example of the real need for agility,’ said Alexander Tabb, partner and COO at Tabb Forum, who moderated a webinar, “Taming the Big Data Behemoth ‑ How to Align Your Data Infrastructure to the 21st Century.” The webinar looked at trends in technology, the surge in big data and how to manage data amidst regulatory demands.

According to Tabb, Brexit is like a big asteroid that comes barreling out of nowhere and knocks everything haywire.

But the Brexit vote was not unforeseen, noted Tabb. “Everyone knew that the UK’s referendum was happening on June 23,” he said.

Two weeks before the vote, polls and bookies were showing that Brexit was not going to happen, said Tabb. “Bookies were confident that a vote to remain was coming,” noted Tabb.

Instead, “The markets were caught off-guard, and are scrambling to adjust to the new reality,” wrote The Wall Street Journal on June 24.

Vishal Sood

“Brexit is an example of what can change and how things can happen suddenly,” said Vishal Sood, Director, Equities Electronic Execution Technology at Citi, who spoke on the webinar. According to Sood, Citi was not caught flat-footed. “We knew what could happen. We were preparing for it,” said Sood.

Trading After the Vote

Exchanges have also had to deal with surging volumes after the Brexit vote.

Dominick Paniscotti

“Your system better be able to handle the Brexit when it occurs,” Dominick Paniscotti, Vice President, System and Performance Engineering, Nasdaq, told attendees at Market Media’s recent Summer Trading Network event. ”There’s this continuing demand that it needs to be faster. And faster is not even enough anymore. It needs to be faster and it needs to be highly deterministic under load.”

If an exchange is processing data at 500 nanoseconds, and then all of a sudden Brexit happens and it’s processing orders in 5 milliseconds, [then] you get these phone calls, asking “Why the heck is this happening,” said Paniscotti.

Lessons Learned?

 The question is what lessons can be learned from Brexit technologically?  How can financial firms prepare for future events that are almost certainly around the corner?

Firms are living in a time of unprecedented change in the global capital markets, advised Tabb.

“You need to be able to get in and out of markets at a moment’s notice.” A lot of this change is driven by regulatory initiatives, such as Dodd Frank, the SEC Equity Market Structure Committee, and FINRA, said Tabb. Other projects coming down the pike, such as the Continuous Audit Trail (CAT), will require more transparency and massive amounts of data transfer, while Europe has EMIR, MiFID II, MiFIR and AFM.

Events like Brexit also underscore the fleeting nature of investment returns and flows.

“Alpha has never been more transitory. It shifts and flows and is very hard to capture depending on what people are trading,” said Tabb. To capture alpha, “institutions need to be able to get hold of that data, manage that data, massage the data and distribute that data” in ways that they haven’t experienced before electronic trading took off around 2006, added Tabb.

What’s needed is a more agile infrastructure, which means adopting some of the newer technologies, such as open source and APIs (application programming interfaces), several speakers suggested on the webinar.

Arjun Nagar

In the past four to five years, there’s been unprecedented growth of unstructured content, noted Arjun Nagar, Senior Business Director for market development for North America Enterprise Capabilities, Thomson Reuters.

“[Capital markets firms] have to evaluate their internal processes and systems to see how they will address and manage not only their internal complexity of data, but the unprecedented growth of unstructured content as well,” said Nagar.  With advancements in technology, Nagar said organizations have found a way to look into that data and make smarter decisions.  The key is for organizations to understand the data by data linkages, he said.

With events such as Brexit and regulations driving demand for analysis of big data, firms are also looking at partnering with FinTech companies involved with cloud computing to lower their costs and to become more agile. They are asking, “How do I move from an industry focused on speed toward smarts or intelligence,” said Tabb. Historically banks have been focused on customization, but now people are talking about the idea of configuration. “We are moving now towards a configuration environment in which institutions look at partner technology startups,” said Tabb.

Build vs. Buy

 In the past, banks have developed all of their own technology and resisted outsourcing it. But the pendulum on build vs. buy could be swinging the other way.

What’s changed is that a lot of clients, particularly in equities, are asking the sell-side for execution data in real time to be made available to them, noted Citi’s Sood.  US equities markets have had to deal with tons of data since decimalization in 2001, leading to fragmentation of trading across scores of venues. “Regulatory change is demanding that this data be made available. All clients are asking to know the details of how we took care of the order from them. In the past it was a small set of clients,” he said.

“Transparency and the real time ability to prove the quality of execution at this juncture is not a luxury. It’s a commodity,” said Citi’s Sood. “Everyone has to do it and that will be the standard going forward.”

As such, the UK’s Brexit vote served as a wake-up call about market infrastructure and managing big data. While the ramifications of the Brexit vote are still evolving, there is no doubt that such events are bound to happen again and that market participants will be tested for their agility.


This article originally was published on the FlexTrade FlexAdvantage Blog.

Latest blogs

Martijn Bos Holland FinTech

Making it through the rain: Finance in times of turmoil

You’d need to be living on a remote island, without electricity or internet to not be aware of what the world is going through right now – a medical crisis that has spread across the world and disrupted supply chains, goods and services production, Read more »

James Devoy Sysnet Global Solutions

PCI DSS and Remote Assessments

COVID-19 is obviously changing many aspects of daily life. Some will be short term measures to see us all through these times, although I wonder how many will become more permanent fixtures in our lives. The PCI SSC has provided guidance to allow Read more »

James Booth PPRO

Brave New World: A Futuristic Vision of Payments

Over the last ten years, the retail e-commerce ecosystem has undergone a wide-ranging transformation. As recently as 2010, the e-commerce and payments value chain were relatively straightforward: Any eCommerce merchant could integrate a payment Read more »

Nish Kotecha Finboot

How blockchain could potentially transform global healthcare in the wake of COVID-19

In the globalised world we live in, entities such as the World Health Organization (WHO) have been established to ensure cooperation between different governments on global health-related issues. In the face of pandemics such as the one we are Read more »

Lina Andolf-Orup Fingerprints

Dispelling biometric myths and misconceptions

Gangsters cutting off enemies’ fingers to access secret locations and spies lifting fingerprints from martini glasses - the imagination of the entertainment world has been running wild ever since biometrics entered the scene. Couple that with the Read more »

Related Blogs

Dr Nicolai Baldin Synthesized

Big Data doesn’t need to be big, or daunting

Collecting and collating customer information in order to create new, or enhanced products and services is a strategy as old as business itself, but the process involved has always been a huge time and resource drain for companies. Read more »

Grant Eggleton P2 Energy Solutions

Big Data in the Upstream Sector

It’s not the data itself, but the ability to put it towards some useful task that matters. In the oilfield, a simple yet powerful way of making use of data and predictive analytics is for automatic surveillance by exception. By learning from the Read more »

Danny Molhoek, Lexmark

How Big Data and IoT Can Drive Behaviour Change

Today, you can control the temperature in your house from your office. Your car can update its maps from the garage. You can even boil the kettle for your morning cup of tea before leaving your bed. All this is possible due to the convergence of the Read more »

Rahul Singh HCL Technologies

Putting Your Money on Big Data and Analytics for Guaranteed Wins

Banks and financial services have always had a voracious appetite for data. They have a finger on the pulse of company balance sheets, interest rates, money supply, exchange rates, inflation rates, stock market movements, bond yields, customer Read more »

Ivy Schmerken FlexTrade

Quant Funds Get Sentimental About Big Data

Big Data Fed by Social Media Social media is creating a torrent of data every minute.  But how much of this firehose is relevant to making better investment decisions? As hedge funds and asset managers eye an explosion in unstructured data from Read more »

Free Newsletter Sign-up
+44 (0) 208 819 32 53 +44 (0) 173 261 71 47
Download Our Mobile App
Financial It Youtube channel