Streaming Trading Data For Regulatory Compliance

Regulations such as MiFID II demand an accurate and timestamped record of all trade activity, yet streaming data for regulatory compliance is not as easy as in the movies.

Streaming Trading Data For Regulatory ComplianceBy Jasmine Noel    February 4, 2016      Thinking

I was chatting with a colleague about the unbelievability of action movies recently. In Shadow Recruit, Jack Ryan is a mild mannered regulatory compliance officer by day (probably working on getting MiFID II delayed) – and a super-human financial analyst by night. He can simply glance at a rapidly scrolling stream of financial data and gain the spark of insight needed to know the exact time of a coordinated physical and monetary attack. A terrorist plot, decades in the making, is unraveled in a few minutes.

Hollywood aside – most regulatory compliance officers would love to do what Jack Ryan did in that movie. Go to a stream of data, pull out the relevant bits, correlate and gain that spark of insight to answer whatever question their regulators were asking that day and quickly generate reports to prove compliance.

The timing of electronic trading data is important for regulatory compliance because regulators often want to know the exact sequence of events. The most accurate timestamp for a particular trade request is found by seeing when the network packets carrying the trade order left the trader’s system. Typically, this is not the same time stamped by the application log.

We discovered this working with some of our electronic trading clients who were looking for an answer to a different set of questions around using operational speed as a competitive weapon, for example:

  • If my latency increases, should I withdraw from the market or stay in?
  • If I reduce the latency of my IT systems, will it make a difference to fill rate?

We found that application log time stamps varied widely depending on how the developers coded the software. This can make correlating data from multiple systems to piece together the actual sequence of events a complete mess.

To paraphrase Donal Byrne’s WallStreet & Technology article: We need a higher level of timestamp precision. However, simply having precision timestamps for regulatory compliance is the easy part of the problem. The hard(er) part is ensuring the accuracy of the recorded timestamps so that we can confidently determine the relative time between two events through clock synchronization, and trust the results.

Furthermore, regulators are asking for kill switches, which we’ve talked about before, but effective use of a “big red button” means we need to know exactly when an event occurred. Before you can even start to properly deal with anomalies, whether trading or IT related, you have to have real-time visibility and that confidence in reconstructing a timeline.

The timeline recreation is one of the things making regulatory compliance with MiFID II requirements tricky in the real-world where trillions of transactions traverse financial networks every day -- without any super-human Jack Ryans around to save the day.

Streaming Trading Data For Regulatory Compliance

Jasmine Noel, Product Marketing & Sales Enablement, Corvil
Corvil is the leader in performance monitoring and analytics for electronic financial markets. The world’s financial markets companies turn to Corvil analytics for the unique visibility and intelligence we provide to assure the speed, transparency, and compliance of their businesses globally. Corvil watches over and assures the outcome of electronic transactions with a value in excess of $1 trillion, every day.

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