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Surveillance Technology

Surveillance Technology. Market Fragmentation and Data Proliferation Steve Leegood Director, Financial Markets Bryok. Market Fragmentation. choice of venues orderbook or OTC security or derivatives of it an index containing it an ETF containing it other securities related to it

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Surveillance Technology

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  1. Surveillance Technology Market Fragmentation and Data Proliferation Steve Leegood Director, Financial Markets Bryok

  2. Market Fragmentation • choice of venues • orderbook or OTC • security or • derivatives of it • an index containing it • an ETF containing it • other securities related to it • slicing of orders

  3. Market Fragmentation • regulators should have "a single set of eyes looking at the market holistically"Rick Ketchum, Chairman and CEO of FINRA "I'm looking for my keys" "Why here?" "It's where the light is"

  4. Market Fragmentation • seeing all the trades is not enough to detect price manipulation - need orderbook detail • need to reassemble chronological sequence and revisit in context: 20-20 hindsight • need to reassemble slices • pulling info on request is not enough • rapid response may be needed • potential to deduce unknown details

  5. Data Proliferation • 1 million messages per sec, high-frequency trading, low latency, co-location • 1 billion orderbook transactions per day, millions in top securities • 100,000 securities • receive and process, reassemble and revisit • different trading models, data not normalised • formal sources, prices & news, plus informal, eg chat rooms, blogs, emails, twitter

  6. Data Proliferation • multi-threading, but respecting dependencies • statistical & time-series analysis and pattern recognition, not just logical or arithmetic tests • dynamic statistical benchmarks • modern data visualisation • orderbook reconstruction • retrieval for "post-match" analysis

  7. Problems • current solutions were not designed for this problem set • architected for constraints that no longer apply • investment has not kept pace • expertise is limited • surveillance is not glamorous • surveillance people are naturally conservative

  8. Solutions • software components • hardware architectures • modern UI and visualisation toolkits • align with trading platform approach • co-exist with and augment legacy systems • invent solutions to reconstruct and revisit • develop new algorithms, models and analysis

  9. Solutions • shared approach • a shared utility • shared data • shared expertise and techniques • cost-benefit • reduce cost of ownership • access new revenue streams: systemic risk management, best ex, TCA, consolidated tape • trust means liquidity means health

  10. Summary • fragmentation and data proliferation are a perfect storm • market abusers aren't about to become less sophisticated • surveillance is not about to become easier • technology makes the problem tractable • political and commercial pressure makes a solution necessary and desirable

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