Risk, Compliance and CEP
Risk management is at the heart of what capital markets firms do, according to Kenan Maciel, director of New York-based consultancy Lab49. And looming regulatory requirements and technological advances make it more important than ever.
Maciel spoke during a Waters Technology Risk and Compliance webcast on Wednesday. After some discussion of Basel III and Dodd-Frank, the hour-long event focused on technologies available to firms aiming for a near-real-time view of their risk exposure; challenges facing financial institutions developing a cross-asset, firm-wide view of their risk exposure; and how external factors drive compliance functions within financial services firms.
With risk management at the heart of these firms’ activities, in-memory databases are key to high-performance risk management, according to Sybase’s Neil McGovern, who also spoke during the webcast. He described how firms employ the in-memory Complex Event Processing technology to manage risk throughout the trade life cycle (right).
But it is not enough to manage risk. Businesses must also aggregate their risk, according to McGovern, and the data aggregation portion is quite difficult.
Firms using disparate engines to calculate risk (say one in New York, another in London and another in Tokyo) are likely to end up with many different outputs. Yet they must aggregate that output, calculate their risks and aggregate that risk in real-time (left). That is where CEP technologies such as Aleri and RAP are especially valuable.
Risk aggregation is all about getting information together in a timely fashion, according to McGovern. Real-time analytics, scalability and data storage for compliance are among the major issues comprising risk aggregation for high-frequency trading firms.
HFT is still a threat to the marketplace as evidenced by the Flash Crash, according to a plurality of viewers polled during the webcast. The second most popular answer to the question was that regulators had the situation under control via circuit breakers and other methods.
Check back here for a link to the replay.
Disclaimer: The individuals who post here work at Sybase.