Whatever You Do, Don't Push the Button
Every time I go on vacation, it seems to coincide with another technical meltdown at a major financial services firm. The first time, it was NatWest's mini-meltdown that they still seem to be picking over now. This time, while I was in New York last week, Knight almost imploded with élan, covered in a particularly adroit fashion by my colleague, Jake Thomases, in this column last Friday. Add in the continuing woes at the Tokyo Stock Exchange (TSE), mix in some money laundering accusations and all the rest, and you have to ask; what's going on?
Part of it, I'm sure, is just bad timing. Taken separately, these incidents would be bad enough, but together you can imagine what Antonio felt like when his ship was driven aground by Prospero's tempest. I'm sure I'll start receiving various e-mails as soon as I say this, but glitches do happen. Technology isn't infallible, as much as the vendor community would like you to believe. But continuing issues do start to point to wider, endemic structural issues that could do with some attention.
Plan B
"Another financial sector 'software glitch', this time at the Tokyo Stock Exchange, hits the headlines hot on the heels of Knight Capital, the Spanish bourse and RBS," says David Silverstone, software testing expert at NMQA, which provides services to big names such as Goldman and Barclays. "Firstly, these problems are 100 percent preventable and CIOs should be asking some tough questions of their development and testing teams about the balance between time to market versus quality of delivery. Secondly, if quality isn't aggressively enforced in-house, external regulation will come into play. Senior executives need to understand that IT is the business and if IT fails, the business fails."
IT, I think, is going through something of an identity crisis at the moment. Traditionally it's always been important─a business runs on its technical backbone, right? It's mission-critical in the purest form of the word. But it's never been the sexiest of areas until quite recently, when it's moved from blocky mainframes to sleek blades, and dodgy internet connections to co-location and microwave networks for ultra-low-latency. As a result, some people I speak to are starting to feel that technology is moving out of the hands of IT, and too much into boardrooms.
With that comes a learning curve. While traditionally, senior management in investment banks has come from the trading desks, more influence is starting to come from risk, from compliance, and from the CIO/CTO function, most of whom have a deep understanding of technology, if not always full background in it. These people get it, but the constant pace of change within the industry, the need to be quicker, faster, and better, sooner means that layering occurs and starts to create problems.
You can't just say that, oh, it's because it's too complex. Giving a simple answer to an issue that is supposedly complex, by definition, negates the idea of complexity.
Revamp
Wholesale rip-and-replace is not a practical method of maintaining a conversant IT infrastructure. It's too expensive, and too disruptive, particularly with systems that need to be up and operational 24/7. So you tweak where you can, and adjust where possible, until you can phase in new tech seamlessly.
Some of the technology problems in the industry have come from this sprawling IT estate, and that can't be denied. Some haven't. Knight, for instance, lost an enormous amount of money in a sobering passage of minutes, but that wasn't down to the fact that their execution engine didn't tie up with their reconciliation software, or that their HFT layer was squeezing a legacy backend dry until it finally decided to pull the trigger on itself. It's because an algo went rogue, and there's not a great deal that can be done about it, particularly when the regulators refuse to reverse trades. Blame for that particular can of worms is an entirely separate issue.
The point is that there are clearly problems that need to be worked through, but they can't be lumped into neatly defined brackets (again, I'll expect that sentence to be shot back at me later today). You can't just say that, oh, it's because it's too complex. Giving a simple answer to an issue that is supposedly complex, by definition, negates the idea of complexity.
If you'd like to talk about IT estates, meltdowns, algorithmic glitches, or just how brilliant Errol Flynn was in The Adventures of Robin Hood in Bryant Park last Monday, give me a shout on +44207 316 9811 or james.rundle@incisivemedia.com.
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@waterstechnology.com or view our subscription options here: http://subscriptions.waterstechnology.com/subscribe
You are currently unable to print this content. Please contact info@waterstechnology.com to find out more.
You are currently unable to copy this content. Please contact info@waterstechnology.com to find out more.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@waterstechnology.com
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@waterstechnology.com
More on Trading Tech
Ace high or busted flush? Digital Asset’s mixed fortunes mirror DLT adversity
The vendor hoped to remodel post-trade using blockchain technology—and it still might—but its bumpy progress raises questions over the future of DLT in finance.
This Week: BlackRock/Preqin, Trading Technologies, FIA Tech and more
A summary of some of the past week’s financial technology news.
Adaptive’s Aeron goes live on Microsoft Azure Marketplace
The messaging software used for building bespoke trading platforms is now available on Microsoft’s marketplace, making it accessible through major cloud providers.
Bloomberg, industry bodies push back on Cboe’s proposed OEMS rule change
Some industry bodies disagree with the options exchange’s proposal to carve its Silexx OEMS out of the SEC’s definition of an exchange facility and place it into a separate business line.
Waters Wrap: CME, Google and the pursuit of ultra-low-latency trading
CME Group and Google have announced Aurora, Illinois, as the location for the exchange’s new co-location facility. Anthony explains why this is more than just the next phase of the two companies’ originally announced project.
WatersTechnology latest edition
Check out our latest edition, plus more than 12 years of our best content.
Natixis refines in-house interoperability model
The French asset manager has refined its canonical data model over the last decade, as the interoperability movement continues to evolve.
Zeros and ones: Industry contemplates T+0 as the next step
With the North American transition to T+1 settlement complete, same-day settlement could be the next goalpost set, though skeptics are many.