JPM: Risk Model Pain

Wall Street & Technology’s article “JPMorgan To Be Haunted by Change in Risk Model” touches on a few items I mentioned in my European Trading Architecture Summit last year.

Deutsche Bank Looking to Lead with Lodestone?

Interesting video over on Lodestone’s WordPress site

Microsoft Industry Reference Architecture for Banking (MIRA-B)

Overview available here.  The PDF is available is you are interested in the full read.  After a view brief read, my initial comments would be that some of the diagram are interesting, but its a little to high level for me.

Java final keyword – View?

The debate appears to be still raging on if/when the Java final keyword should be be used   It reminds me of the OS debate of the 90′s.  What’s your view?

The iPad Train

Wall Street & Technologies article “Financial Firms Can’t Ignore iPad and Android Tablet Apps” provides insight into how the financial vertical is leverage the uptake of the iPad.  I wonder if the financial sector will embrace Windows 8 Metro in the same way? Likewise, will all new Single Bank/Dealer Platforms be released first on the iPad before the desktop browser multi-window version is offered?

Outdated Core Systems

Finextra has an interesting article titled “Outdated core systems a drag on growth for European banks”.  Essentially this means that the European banks need to spend and improve their core system to improve gains in the Single Dealer/Bank Platform space.

providing a unified customer experience across channels is an issue for about half of European banks, impacting their ability to effectively cross-sell

FX Liquidity, “Follow The Sun”, and Price Engines Thoughts

First, lets clear up what “Follow the Sun” trading means.

The spot FX market is unique to any other market in the world, as trading is available 24-hours a day. Somewhere around the world, a financial center is open for business, and banks and other institutions exchange currencies, every hour of the day and night with generally only minor gaps on the weekend. Essentially foreign exchange markets follow the sun around the world, giving traders the flexibility of determining their trading day.

A quick read on Dummies “Liquidity and the Foreign Exchange Market” provides a view on liquidity.  Of particular importance:

Forex market liquidity will vary throughout each trading day as global financial centers open and close in their respective time zones

Armed with this information, we can now turn to FCM360 “Foreign Exchange Hosting, Colocation & Connectivity” article that provide a good overview of the various FX venues and Colo’s.

Looking at the FCM360 network diagram, ignoring the fact that its FCM360, the choice of location for an FX pricing engine of a sell-side company is usually going to be either New York or London, or both.  The “both” are often chosen to leverage “Follow the sun” from a liquidity perspective.  What this means is that since Asia and European open before the US, during the course of a trading data, the ideal location of the Pricing Engine would be in London to reduce latency and sit closer to the liquidity centers.  As the liquidity moves through the trading day, it maybe advantageous to swing the Pricing Engine to New York to gain a latency advantage.  Obviously the swinging of a Pricing Engine from one locations to another needs to be well managed and leverage an appropriate software architecture, otherwise there could be costly implications.

Risk management could also take advantage of “Follow the Sun”, since the market data and hence risk calculations that leverage this data and the trade portfolio’s if located close to the source of the changing data, can themselves reduce the data movement over a LAN/WAN, and thereby speed up the overall calculation time.