John O’Hara CEO Taskize

QCon London 2013

The Technology of an Equity Trade

Topics…

• Equity market backgrounder

• Business processes

• The equity systems pipeline

• Which kinds of system go where?

• Technology products you may find

• Context within a large bank

Leading electronic equity markets

Largest by volume: 1.4 trillion trades on Indian NSE

Largest by value: $13 trillion on NYSE

2012 World Federation of Exchanges Market Highlights

Primary electronic trading patterns

Increasing Commission rates and Human Interaction

Direct Market

Access (DMA)

Market Connectivity

Algorithmic

Trading

Engine

EXCHANGE

Algorithmic

Trading

Engine

Mar

ket D

ata

Reg

ulat

ory

repo

rtin

g

Exchange

Matching

Engine

Latency

aware

HFT No Touch Low Touch High Touch

Co-located Gateway

Client Connectivity

Direct Strategy

Access (DSA)

Programs /

Baskets Single Orders

Program

Trading

System

Single Orders

INTERNAL

MARKETS

CROSSING

NETWORKS

DARK

POOLS

Latency

sensitive

100 orders

yields 1 trade

1 order

yields 5 trades

Equity transaction volumes

Deal

Size

85%

Deal Volume

700%

10 years

We are much more focused today on operations

and technology and being a low-cost provider than

we would have articulated about ourselves 10 or 15

years ago

Lloyd Blankfein, CEO Goldman Sachs

November, 2012

These are not low-cost people…

The time is right for a giant leap forward, with

economic pressure and technological potential

creating the conditions for change

The Triple Transformation, McKinsey

October, 2012

Low cost

Scalable

Accessible

Innovative

Origination Pre-trade Services

Trading Connectivity

Market Making

Pricing

Order Management

Execution Figuration Allocation P&L

Reporting

Lifecycle Management

Confirmation and

Matching

Risk Management

Limits Management

Regulatory Reporting

Accounting Margin and Collateral

Management

Credit Risk Management

Settlement and Clearing

Controls

Master Data Client

Management Market Data

Management Informatiom

Market Risk

Speed & Latency Reliability & Throughput

Exchange

Profit and Loss

Simple order flow through systems

Block Trader

Smart Order

Routing Booking

Allocation &

Figuration

Settlement & Clearing

Custodian

Regulatory Reporting

Fund Manager

Sales Trader

Trans. Cost

Analysis

Exchange

Order books and trade matching at almost every step

Block Trader

Smart Order

Routing Booking

Allocation &

Figuration

Settlement & Clearing

Custodian Fund

Manager Sales Trader

Street

Side

Client

Order

Child

Orders

Market

Order Fill Allocation

Parent

Order

FIX Financial Information Exchange

Real Time Market Data

Tick Database

Electronic Comms Network

Multilateral Trading Facility

Market Risk

Exchange

Profit and Loss

Global smart order routing

Block Trader

Smart Order

Routing Booking

Allocation &

Figuration

Settlement & Clearing

Custodian

Regulatory Reporting

Fund Manager

Sales Trader

Trans. Cost

Analysis

Electronic Comms Network

Market Risk

Exchange

Profit and Loss

Program-trading: Process large baskets automatically

Block Trader

Multilateral Trading Facility

Smart Order

Routing Booking

Allocation &

Figuration

Settlement & Clearing

Custodian

Real Time Market Data

Regulatory Reporting

Tick Database

Fund Manager

Sales Trader

Trans. Cost

Analysis

Program Trading

Electronic Comms Network

Market Risk

Exchange

Profit and Loss

High Frequency Trading / Market Making

Block Trader

Multilateral Trading Facility

Smart Order

Routing Booking

Allocation &

Figuration

Settlement & Clearing

Custodian

Real Time Market Data

Regulatory Reporting

Tick Database

Program Trading

Fund Manager

Sales Trader

Trans. Cost

Analysis

High Frequency

Trading

Electronic Comms Network

Market Risk

Exchange

Profit and Loss

Different kinds of technology in the life cycle

Block Trader

Multilateral Trading Facility

Smart Order

Routing Booking

Allocation &

Figuration

Settlement & Clearing

Custodian

Real Time Market Data

Regulatory Reporting

Tick Database

Program Trading

Fund Manager

Sales Trader

Trans. Cost

Analysis

High Frequency

Trading

100TB time series DB

Specialised languages

Identical cable length to every server

Fast single-thread execution

Atomic clocks

In-memory databases

Hi speed journals

C# desktop apps

Hardware DB

appliances

Hardware

messaging

appliances

Standardised messaging

Java applications

Data ETL for regulators

Grid computing

Functional programming

CEP Engine

Spaces ‘put/take’

architecture

Specialised 10Gb Card

Prepared network frames

Short-lived

workflows

Long-lived

workflows

Electronic Comms Network

Market Risk

Exchange

Profit and Loss

Block Trader

Multilateral Trading Facility

Smart Order

Routing Booking

Allocation &

Figuration

Settlement & Clearing

Custodian

Real Time Market Data

Regulatory Reporting

Tick Database

Program Trading

Fund Manager

Sales Trader

Trans. Cost

Analysis

High Frequency

Trading

An unscientific survey…

Product names, logos, brands and other trademarks referred to are the property of their respective trademark holders. This diagram is

presented “as is” and no warranties or representations as to accuracy, completeness, suitability or fitness for purpose are expressed or implied.

Investment bank…

• 1,000 - 2,000 systems

• 8,000 - 10,000 technology staff

• $1 Billion development and maintenance

Investment Bank F

X

Fix

ed In

com

e

Equ

ities

Prim

e B

roke

rage

Com

mod

ities

Cre

dit

Mer

gers

& A

cqui

sitio

ns

Global Bank R

etai

l Ban

k

Cre

dit C

ards

Inve

stm

ent B

ank

Com

mer

cial

Ban

k

Ass

est M

anag

emen

t

Cor

pora

te A

dvis

ory

Investment Bank F

X

Fix

ed In

com

e

Equ

ities

Prim

e B

roke

rage

Com

mod

ities

Cre

dit

Mer

gers

& A

cqui

sitio

ns

Global bank…

Approx

$10 Billion annual technology costs

Banks are industrialising

A new era of banking technology

Robust technical leadership is needed