Can Real-Time Profit and Loss tame the turbulent markets?

by Bob Giffords, Independent Banking and Technology Analyst
and Mark Palmer, President and CEO, StreamBase Systems

The financial markets are accelerating: transaction volumes are up, latencies are down, complex cross asset trading up, revenue margins down. Recently markets have seen sudden spikes in volumes, and nervous volatility when the old rules of thumb broke down. Technology and global regulators have both changed those rules by increasing transparency, intensifying competition, and multiplying e-commerce relationships exponentially. Reforms such as Reg NMS in the US and MiFID in Europe have further  increased the pressure, along with Basel II and the fair value accounting rules of the new International Financial Reporting Standards (IFRS). The IFRS require, for example, firms to mark more of their assets and liabilities to market, while Basel II is much more explicit about risk adjusted capital reserves needed. Now, when markets move, traders need to catch them on-the-fly to cut their losses and go with the flow to ensure compliance with all the rules and customer mandates. The difference between just-in-time and just-too-late has just become bigger. …

New technologies like complex event processing (CEP), applied as a “white box” system for Real-Time Profit and Loss, have turned tracking real-time market movements into a practical proposition for ordinary firms. They can also play a key role in easing the transition to fragmented markets with their notorious dark pools and to the complex array of order, execution and liquidity management systems to support them.  download the article