Improvements in technology are bringing the concept of plug & play closer to a reality and creating ways to control costs of trading and achieve software agility.
Anyone involved in financial markets knows the management of the deal chain, which is still all too easy to break, is extremely complex, despite the deceptive impression that the order life cycle is simple: orders are placed, deals are booked, trades settled, commissions paid or received, and profits (or losses) entered into the ledger.
The advent of electronic trading has, on the whole, made things more efficient. But the deployment of state-of-the-art technology remains extremely complex, especially so when a new product is required to interface with a legacy one.
The maintenance of trading technology will always be an ongoing issue. In a perfect world, it would be easy to choose new best-of-breed solutions and mix them with existing systems. But the reality is that most of the time this is not possible, with cost being a major factor.
From solutions to business services
To be able to completely cherry pick the best elements out of any vendor’s offering and integrate them easily and seamlessly with existing legacy and other components would be trading system Nirvana. With the advent of service-oriented architecture (SOA), this dream has started to become a reality. SOA is an IT architecture type that provides business services instead of applications. Sets of services developed via SOA can be identified and exposed through a messaging bus facilitating seamless communication between providers of services and consumers of services. Sticking to standards like FIX inside the bus dramatically facilitates integration and interoperability.
Not surprisingly, much has been made of the potential of SOA, which has only increased with the development of its offspring known as software as a service (SaaS). For a while, it was not absolutely clear whether the noise around SOA and SaaS was genuine or mere hype. But the tightening of purse strings, which has inevitably followed the subprime crisis, has made it apparent that SOA and SaaS have the potential to radically improve the way trading systems across the entire deal chain integrate and operate.
Importantly, SOA allows institutions to select those functions of its legacy systems it wants to continue using, while replacing those it does not want. It also offers benefits to vendors, such as SunGard, although according to Adel Torjmen, Chief Architect for SunGard’s global trading business, it does require an almost complete rethink of their business models.
“In the past if a client decided to use a solution such as our comprehensive GL Ubix derivatives back office, it had to buy everything. What we are now doing is considering how we can isolate functions which could be useful as components separate from the whole of products like GL Ubix. We know GL Ubix is designed to follow a derivatives position, calculate the P&L, and calculate margins, brokerage fees. If we can extract the service from GL Ubix which calculates margin only, for example, we have created a whole new service. We are elementising it into different parts. SOA provides a way of presenting a product not as a monolithic block, but as a set of individual components,” he says.
To do so requires a system which can manage all these separate processes. SunGard’s solution is the Infinity Process Platform. This is a business process management system, which Torjmen says has three core concepts behind it. Its purpose is:
- Improving integration
- Adopting common standards
- To present the company’s portfolio of solutions as a set of services.
“We need to be prepared to move away from a focus on large systems sales, and instead deliver added-value individual services that are cost-efficient and meet the demands placed on them. The reality is that clients do not want to be penalised by a lack of efficiency at their vendors,” Torjmen points out.
“The Infinity Process Platform can be thought of as an umbrella for SOA. We’ve built this in order to create a common library of shared services and a backbone infrastructure. This provides a framework to allow clients to build services from legacy applications or from scratch. It really delivers the full concept of SOA and it gives clients more flexibility to select pieces, rather than blocks. It even allows the client to take one component from one provider, and another from a different one,” he adds.
The benefits for clients are already starting to be seen. “One major global broker wanted to manage orders on derivatives as well as to allocate them automatically. SunGard’s global trading business provided GL Stream and GL Clearvision. To enable the management of allocations, two services were created and registered in the Enterprise Service Bus (ESB): one from GL Stream, Derivative Allocation Publishing, and one from GL Clearvision, Derivative Allocation Registration. The workflow combining these two services hosted into the ESB insures the completion of the STP between GL Stream and GL Clearvision,” says Torjmen.
Bringing SaaS to life
Vendors have to realise that SOA requires a new way of selling: SaaS. Torjmen likens it to an ASP offering as clients can procure the service they require over the web in real time. Vendors could give access to the service so that the client can set it up. They could also build an answer with several services if the client’s request is complex. SaaS systems also allow metering the time or the usage during which the client uses the services. This means financial firms could be priced only for the time they use services. With SaaS, they could achieve their trading strategies with cost-effective and scalable solutions.
As a financial firm may select several vendors to answer its needs, business services have to run properly together. They have to be multi-tenant which means that the same infrastructure (application servers, applications, processes, services) can address many clients at the same time. Mutualisation of IT resources for the benefits of the financial community appears to be one of the ways to the future of the industry.
“Infinity is the global umbrella which covers all of this within SunGard. It’s a project which is becoming concrete this year. First services provided by SunGard’s global trading business should be available by end-2009. SunGard finds a right answer to a widespread request: clients want to pay for what they use and for the time they use it. They increasingly want to lease, not to buy. Ultimately, why should a banker or broker be managing their IT systems?” concludes Torjmen.
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