The use of complex event processing (CEP) software has moved towards mainstream acceptance in capital markets according to one expert, helping firms adopt more diverse trading strategies to fight dwindling margins and meet increased regulatory demands.
Following the global financial crash many firms have moved to trading across multiple venues and asset classes, increasing the amount of market data being processed in order to support trading decisions.
Meanwhile increased regulations around the collation of trade data for compliance reasons have also added to the information that trading firms are required to monitor.
Writing in a recent blog post, Rik Turner, senior analyst at Ovum, said this has meant that more capital market firms have looked to CEP, using the software able to pull together a number of streams of data and generate real time insight.
CEP has been implemented in capital markets for a number of years, initially to support algorithmic trading, with a CEP engine handling multiple streams of market data to support decision-making at fractions of a second.
The technology has since seen its uses expand among a growing number of capital firms, as the market for CEP has begun to mature. This has meant CEP is now also used for smart order routing, market data aggregation, as well as in meeting regulatory requirements around monitoring the masses of trades being made.
The expanded use has been reflected by interest among vendors, and there has been a flurry of acquisition activity around CEP firms.
Tibco announced in June that it had bought StreamBase Systems, providing an event-based alternative to the vendor’s existing batch-centric architectures. This was quickly followed by news of Software AG’s buyout of another CEP firm, Apama, from Progress Software.
Tibco and Software AG also face competition from the CEP software sold by Oracle and SAP, which bought Sybase in 2010, as the initial wave of start-ups are consumed by the large vendors.
According to Turner, the acquisitions give an indication of how the technology has moved towards wider acceptance among capital firms, noting that CEP has now “moved beyond early maturity to become part of the mainstream technology toolkit in the capital markets”, and is broadening out into other verticals besides.
“A significant proportion of market participants should now be interested in CEP, particularly for its ability to carry out pre-processing of multiple streams of data to speed the decision-making process.
“CEP is now used in a variety of applications within capital markets, from the algorithmic servers where it started out, to risk analysis and market surveillance and supervision,” he said.
Turner added that early adopters will benefit as the technology takes root further afield in other verticals with the need to deal with masses of events based data. A wider market will drive down cost and improve quality, he said.
“As part of the larger organisations that now own CEP vendors, the technology will increasingly be marketed into other verticals in which Big Data and speed of analysis are relevant.
“This should, in turn, be good for users in the capital markets, as prices should go down and technology should improve."