Waters North American Trading Architecture Summit April 2011

Optimizing High-Performance Trading Solutions: An Engineering Perspective

Matt Davey, CTO, Lab49 (www.lab49.com)Blog: http://mdavey.wordpress.com

April 2011V0.84

Wednesday, 27 April 2011

http://mdavey.wordpress.com

http://mdavey.wordpress.com

About Lab49Lab49 is a strategy, design and technology consulting firm. Lab49 deliver strategic consulting and advanced solutions for the financial services industry. Our clients include many of the world’s largest investment banks, hedge funds and exchanges.

We design and deliver some of the most sophisticated and forward thinking financial applications in the industry today, and have an impeccable delivery record on mission critical systems. Our focus on innovation has led us to adopt user-centric practices that drive the design of solutions based on user needs and goals whilst delivering against the business requirements and delivery timescales. We achieve this through the combination of our industry leading Strategy Group, User Experience practice, Domain-Driven Development philosophy and Lean Agile processes.

Our HistoryLab49 was founded in 2002 and now comprises over 200 people, with major offices in New York and London.

We offer:An exclusive focus on Financial ServicesEmphasis on the development of Front Office Trading SystemsEnd-to-end solutions, from Strategy to User Interface to Server

2Copyright © 2011 Lab49 Inc.May not be reproduced by any means without express permission. All rights reserved.


Overview

Lab49 and Solace Systems

‣Low Latency Trading - Statistical Arbitrage Exchange-Traded Fund (ETF)

‣Single Dealer Platform (SDP) - Foreign Exchange



Low Latency Trading

4


Overview - Statistical Arbitrage ETF (Equities)‣Challenge: To improve

scalability and lower latency within the statistical arbitrage ETF space

‣Approach: Leveraging existing software pattern, a User Experience driven process and hardware appliances to deliver a solution to satisfy the business demand

Lab49 is the leading provider of innovative

5

Lab49 Innovation On Demand

Copyright © 2011 Lab49 Inc.May not be reproduced by any means without express permission. All rights reserved.


Problem Domain

Calculation of the sum of the Exchange-Traded Fund (ETF) parts could show that the ETF is temporarily mispriced. There maybe an opportunity for arbitrage while they re-converge.

6Copyright © 2011 Lab49 Inc.May not be reproduced by any means without express permission. All rights reserved,


Solution

Lab49 Statistical Arbitrage Exchange-Traded Fund (ETF) =

Solace Systems Messaging Middleware (Hardware)+

Microsoft .NET TPL Dataflow Library (Software)



Hardware: Appliance Driven Messaging Middleware

Hardware Messaging Middleware

Offers consistent out-of-the-box experience

Options: Guaranteed Messaging, Message Caching, Geospatial Routing

Lower deployment costs

Unified API

Inter-Process Communication (IPC) - shared memory channel

8

Solace Systems: Messaging Made Easy



Software: Messaging & Dataflow PatternsWe are all trained to think like machines in terms of sequential flow of operation on data,

Microsoft .NET tasks are better than Operating System (OS) threads because tasks enable you to think in terms of chunks of work rather than execution flow.

Tasks, however, still require coordination of state around shared data‣ tasks/thread complexity increases with size of code base

Writing to actor-message or dataflow patterns enable you to design around data flow avoiding shared state‣Value grows as system size and parallelism scales up

9

Microsoft .NET TPL Dataflow Library



Statistical Arbitrage ETF Agent-Actor Architecture

Agent-Actor Architecture leveraging both off-host and shared-memory low latency messaging

10

Asset Normalisaton Virtual ETF

Asset Normalisaton Real ETF

Arbitrag

CCY Pair

Trade Signal

ETF

ETF Fabric

FX/Equity/ETF Market Data and appropriate static data

Trade Signals

RIA

OMS

Per ETFCCY Pair

AssetAssetAsset

Asset (ETF)

NormalisationNormalisationNormalisation

Normalisation

Virtual ETF

Real ETF

ArbTradeSignal

Per ETFCCY Pair

AssetAssetAsset

Asset (ETF)


Normalisation

Virtual ETF

Real ETF

ArbTradeSignal

Asset Normalisaton Virtual ETF

Asset Normalisaton Real ETF

Arbitrag

CCY Pair

Trade Signal

ETF

OMS ...



Demo - The Server

11


Demo - The Client

12


Single Dealer Platform

Building Scalable Distributed Systems

13


Overview - Single Dealer Platform

‣Challenge: Reduce the “last mile” message latency

‣Approach: Moving from, historically, software internet messaging push product solutions to hardware appliances to improve scalability and reduce latency

Lab49 is the leading provider of innovative

14

Lab49 Innovation On Demand



Problem Domain

Wikipedia - A single-dealer platform (SDP) is software used by an investment bank dealing in the capital markets to deliver trading and associated services via the Web. The function of an SDP is to integrate pricing, liquidity, and pre-sales content from multiple sources within a bank and provide access to them via a single user interface. It is thus both an integration platform and a delivery platform.



Solution

Lab49 Foreign Exchange (FX) Single Dealer Platform (SDP) =

Solace Systems Web Streaming (Hardware)+

Paremus OSGi Service Fabric and Akka (Software)



Hardware: Web Streaming (‘Last Mile’)Performance‣9,000 client connections and 900,000

messages per second throughput, average latency of 37 microseconds and just 44 microseconds at the 99.9th percentile

Lower deployment costs

Unified API‣Full publisher/subscriber or request/reply

messaging semantics

17

Solace Systems Web Messaging

Copyright © 2011 Lab49 Inc.May not be reproduced by e=any means without express permission. All rights reserved.


Software: Actor Composite ApplicationParemus Service Fabric ‣Enables composite applications (OSGi, WAR or JEE) to be simply deployed, scaled and managed

‣Utilise available resources dynamically

‣Model-Driven to improve business agility and reduce labor intensive upgrades

‣Robust self healing fabric

‣Low latency DDS based distributed messaging backplane for service monitoring, discovery and configuration

Akka (Open Source)‣Actor framework for Java and Scala

‣Software Transactional Memory

18

Paremus Service Fabric and Akka



SDP Architecture

World’s 1st FX SDP architecture leveraging Solace Systems Web Messaging (for ‘Last Mile’)

19

HTML5 RIA

Internet

Settlement/Confirmation

Content Repository

OMS Pricing Engine

Streaming Engine

Credit

Tiering

Trade Repository

Tick Repository

Authentication/Entitlements

Internal sell-side systems

RIA Services Layer


Trade Signals

RIA

OMS

Per ETFCCY Pair

AssetAssetAsset

Asset (ETF)


Normalisation

Virtual ETF

Real ETF

ArbTradeSignal

Per ETFCCY Pair

AssetAssetAsset

Asset (ETF)


Normalisation

Virtual ETF

Real ETF

ArbTradeSignal


Trade Signals

RIA

OMS

Per ETFCCY Pair

AssetAssetAsset

Asset (ETF)


Normalisation

Virtual ETF

Real ETF

ArbTradeSignal

Per ETFCCY Pair

AssetAssetAsset

Asset (ETF)


Normalisation

Virtual ETF

Real ETF

ArbTradeSignal


Demo - Single Dealer Platform (Foreign Exchange)

20


Demo - Price Failover

21


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Waters North American Trading Architecture Summit April 2011

Economy & Finance