Exclusive Online Only Content
Complex Event Processing
A CEP-based Revolution? | BEA Making Event Processing Splash | The Evolution of Event Processing |
A CEP-based Revolution?
Increasingly sophisticated applications extend to risk, liquidity, pricing, and beyond
January 22, 2008
Risk and liquidity management: Those, says HSBC's Malcolm West, are the key areas that will see major benefits this year as the financial services industry's use of complex event processing (CEP) technology continues to extend beyond its algorithmic trading roots.
"Firms want a good, clear picture of what they've got at any point in time for risk management purposes, and CEP can help with that as well as the need to address liquidity issues and satisfy low-latency requirements," says West, chief software architect of HSBC's corporate investment banking and market group.
HSBC recently completed a two-year development project employing CEP, or stream processing, technology to improve front-office operations, cut down on trade-entry error rates and establish a global trading platform that can better adapt to rapidly changing market conditions.
In 2008 the bank will focus on handling event bursts, according to West, who says that event processing technology reduces development costs and offers a standardized view of an enterprise's data. Eventually, that capability is expected to facilitate trading interoperability across all asset classes.
"The use of CEP technology is, in my view, a form of revolutionary change, and is helping us to integrate all of our trading activities," he says.
West's enthusiasm and expectations are echoed by an ever-larger army of vendors, advisers and consultants seeking to help Wall Street explore ways to leverage technology that can build rules-based applications to analyze and correlate streaming data in real time, and react in microseconds.
Several users and vendors of CEP platforms are calling 2008 a breakout year for pre-built, task-specific and sophisticated event-processing applications. Aite Group projects that by 2010 spending on the technology will reach $990 million.
Risk Applications
Top of mind for CEP providers are the subprime meltdown and subsequent credit downturn. Risk management concerns, they say, are becoming a central focus.
"My ability to manage risk is a function of the amount of information I can gather, the effectiveness of the information I can gather and the timeliness of it. And CEP can definitely help with that," says Don DeLoach, CEO of Chicago-based Aleri, which offers a stream processing development platform as well as targeted CEP-based applications.
Bill Hobbib, VP of marketing at event processing leader StreamBase Systems of Lexington, Mass., predicts that the technology will see increasing use "for real-time risk purposes, real-time profit and loss, and for sharing potential exposure between different trading strategies." More Wall Street firms will start to use event processing for firm-wide risk management, he says, where before such efforts were divided among disparate business units.
"At a high level, we see the future of CEP as more focused on solving specific application problems," says Hobbib.
In November, StreamBase partnered with Reuters to release an application-building tool that leverages the market data provider's high-speed feeds and makes it easier to run analytics. Users can, for example, develop applications for algorithmic trading, smart-order routing and risk management. The product can also analyze machine-readable news that employs sentiment analysis to rate the implications of a given piece of news.
StreamBase also offers a high-performance event storage database system--StreamBase Chronicle--developed with company founder Michael Stonebraker, an adjunct computer science professor at the Massachusetts Institute of Technology.
