Page 1 Software Engineering G22.2440-001 Session 6 - Sub-Topic 2 Sample Enterprise Application Design Dr. Jean-Claude Franchitti New York University Computer Science Department Courant Institute of Mathematical Sciences Best Practices in Technical Architectures for Fixed Income Market Participants Dr. Jean-Claude Franchitti
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Software Engineering G22.2440-001 eTrading business application support Best-of-breed global e-trading solution Secure transactions Collaboration (online chat) Real-time quotes, financial
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Best Practices in Technical Architectures for Fixed Income Market Participants
Dr. Jean-Claude Franchitti
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Presentation Agenda• Observations of a Former Trader• Fixed Income Technical Architectures
– Architecture Development Methodology– Fixed Income Business Process Maps– Fixed Income Solution Capabilities Matrix– Deriving a Conceptual Technology Vision– From the Conceptual Technology Vision to a Logical Infrastructure– From the Logical Infrastructure to a Physical Solution– Physical Solution Implementation Steps
• Conclusion
Observations of a Former Trader
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Trading Environment Characteristics
Anonymity Liquidity Transparency
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Brokers’ BrokerWere They Efficient?• Human factor• Limited network of contacts• Largest firms control the inventory• Regional broker/dealers not well serviced• Difficult to unwind odd-lot positions• Phantom trades• Buy-side firms are not a part of the equation
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Where Are We Now?Automated Trading Systems (ATS)• Eliminates the Human Factor• Buy-side is involved• More regional bank and foreign institution participation• Internet – A border-less enterprise
All of which creates better Liquidity and more Transparency in an Anonymous environment.
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Six Drivers for Change• Institutional and Retail customers• Brick and mortar sell-side institutions• Traditional buy-side firms• Broker’s brokers• Regulatory• Entrepreneurs
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Challenges• Existing legacy systems and newer ATS’s will need to handle anticipated
increases in trade volume implied by the development of STP.• Fixed Income securities can have complex structures. Trading systems will
need to incorporate proper analytics to calculate various essential data.• There are many types of Fixed Income securities which trade in different
ways. Standardized trading methodologies will need to be applied.• Security information repositories will need to be large enough to hold data
on millions of securities.• Present front-end interfaces are no more than client/server versions of
legacy systems.• Back-office systems are antiquated. It may not be feasible to integrate them
if they cannot support the new economy business.• The new Fixed Income market of tomorrow may require an Application
Program Interface (API) to a single Fixed Income exchange.• T+1 must be incorporated into new technology.
Architecture Development Methodology
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Architecture Vision
The eHub Securities Framework
PersonalBlotter and
Services
MessageHandlers
ExecutionEngines
ContinuousNet
SettlementSystems
LedgerOperations
InformationEngines
SecurityMaster
SystemBlotter and
ServicesBrowser/streaming interfaceDirect systems interfaces
Fixed Income Business Process Hierarchies and Maps
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Sales / Marketing Order Room
Customer Acquisition Place Orders
Product Determination
Product Promotion
Campaign Strategy
Purchase & Sales New Accounts Stock Record
Reconcilement
Confirm GTC Orders
Organize Pending Orders
Customer Confirmation
Booking
Clearing & Settlement
Figuration
Recording
Brokerage
Open Accounts
Account Maintenance
Process Thread - does not currently exist
Legend:
Process Thread
Primary Process Group
Intermediate Group
Account Numbering
Audit
Security Movements
Margin
Account Maintenance
Sales Support
Clear Issuance of Checks
Items Due
Extensions
Close Outs
Delivery of Securities
Accounting Proxy & Capital Reorg Cash / Securities Inventory Dividend
Proxy Voting
Annual Reports, etc.Daily Cash Record
Adjusted Trial Balance
Bookkeeping
Profit & Loss Statement
Trial Balance
Establish Accounts
Bank Loan
Vaulting
Receive & Deliver
Stock Loan/Borrow
Transfer
Reorganization
Cash Dividends
Stock Splits
Due Bills
Bond Interest
Generic Trading Business Model
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Average Present Day SolutionFixed Income Trading Process Map
Client
OTCMarket
SubmitsOrder
Validate Order atSales Desk
Valid
"Not a validorder"
NO
Route toTradingDesk
"Electronicpass
through"
Electronicsubmissionexecution
NonAutomatedExecution
No
MonitorExecution
ConfirmExecution(price Qty,
Etc.)RecordOrder
Updatecustomeraccount
yesFront/BackOffice
ElectronicExecution?
Yes
ClientClient Places Order ConfirmationMailed to the
customer
Sales Desk CallsClient
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Sales / Marketing Order Room
Customer Acquisition Place Orders
Product Determination
Product Promotion
Campaign Strategy
Purchase & Sales New Accounts Stock Record
Reconcilement
Confirm GTC Orders
Organize Pending Orders
Customer Confirmation
Booking
Clearing & Settlement
Figuration
Recording
Brokerage
Open Accounts
Account Maintenance
Account Numbering
Audit
Security Movements
Margin
Account Maintenance
Sales Support
Clear Issuance of Checks
Items Due
Extensions
Close Outs
Delivery of Securities
Accounting Proxy & Capital Reorg Cash / Securities Inventory Dividend
Proxy Voting
Annual Reports, etc.Daily Cash Record
Adjusted Trial Balance
Bookkeeping
Profit & Loss Statement
Trial Balance
Establish Accounts
Bank Loan
Vaulting
Receive & Deliver
Stock Loan/Borrow
Transfer
Reorganization
Cash Dividends
Stock Splits
Due Bills
Bond Interest
****
* **
***
Process Thread - does not currently exist
Legend:
Process Thread
Primary Process Group
Intermediate Group
* impacted by BSCHBroker solution
*
Sample Target Business Process Hierarchy
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Resulting Solution Fixed Income Trading Process Map
Client
OTCMarket
Clientlogs in
"Personalized" Web Page
SubmitsOrder
Validate Order
Valid
"Not a validorder"
NO
Manual ReviewNeeded
YesIs this a product in yourinventory or available on
ECN.
No
Route toTradingDesk
Yes
Electronic TradingAvailable
NoYes
"Electronicpass
through"
Electronicsubmissionexecution
NonAutomatedExecution
No
MonitorExecution
E-mailConfirmation
ConfirmExecution(price Qty,
Etc..)
Updatecustomeraccount
"Real-timealert"
Is it Domesticyes
TriggerFXNo
FX Process
Front/BackOffice
ElectronicExecution?
Yes
*
ClientClient Callsin Order
Sales DeskContacts
Client RecordOrder
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Typical Fixed Income Legacy Systems
System FunctionalityOrder Process OPICS Order routing system
Clearing/Settlement INDEVAL The central clearing system forMexican Securities
Custody OPICS Performs Custody role for retailfixed income products
System FunctionalityOrder Process Rossi (OPICS)
S.A.M.SIOPEL
Used for accounting purposes Order routing system System that shows the market
Clearing/Settlement CRYL
EUROCLEAR
CEDEL
The central clearing system forArgentina fixed income products
A clearing vehicle for internationaltrades
A clearing vehicle for internationaltrades
Custody Rossi Performs Custody role for retailfixed income products
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Fixed Income Solution Capabilities Matrix
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DriversTechnical Competitive Customer
Customization / Personalization
Customer Relationship ManagementEfficient cross- and inter-enterprise communicationFast, cost-efficient data links with partnersTrue integration
Continuously available hardware platform (24 x 7)
Flexibility
Global portal (multi brand, multi channel)
Localization
Open, extensible, flexible architecture
Global eTrading business application support
Best-of-breed global e-trading solution Secure transactions Collaboration (online chat) Real-time quotes, financial news, research Online help and training Alerts Analytics (“what if” scenarios)
– Notification: Primary/Secondary failover– Recovery– Verification against state signature– True Hot Standby
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Architecture Support for Fixed Income Market Inventory• Role-based market views• Pre and post-trade workflow supported• All Fixed Income instruments supported
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Architecture Support for Client Access• Local, specialized user interfaces• API’s• Internet access• Legacy order streams
Architecture Support for Legacy Order Stream• Legacy messaging interfaces seen as a user of the system• Interoperates with existing users• Can act as a bridge between deployed hubs
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From a Logical Infrastructure to a Physical Solution
• Projects creation and update• Projects approval• KPI creation• Project information retrieval• System administration
• Data conversion• Supplied volume
data
• Hardware• Standard system software• Reporting software• Ad-hoc spreadsheet functions• Security and performance
• Site navigation design• Site content design• Reusable components• Security workflow • Help
• Office hosting development
Identifying Domains of Change
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RequirementsAnalysis
Development is an iterative process, where for each subset of requirements,
components must be analyzed, designed, developed and deployed
Design
Develop
Deploy
Design
Develop
Deploy
Discover
DiscoverDesign
DevelopDeploy
DiscoverRelease 1
Release 2
Release 3 ...
Proposed Project Lifecycle
Adding Iterations
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Conclusion
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Feature Summary• Ubiquitous Client Access• Pushes Status in Real-time• Framework Inter-operates with Legacy• Support for Current and Emerging Standards• Scales in Capacity and Function• Optimization of Integrated Services• Secure, Mission-Critical Infrastructure
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Addressing the Challengesn Existing legacy systems and newer ATS’s will still need to handle
anticipated increases in trade volume implied by the development of STP.n Fixed Income securities can have complex structures. Trading systems can
plug and play analytics to calculate various essential data.n There are many types of Fixed Income securities which trade in different
ways. Standardized trading methodologies will need to be applied.n Security information repositories will need to be large enough to hold data
on millions of securities.n Present front-end interfaces are no more than client/server versions of
legacy systems.n Back-office systems are antiquated. It may not be feasible to integrate them
if they cannot support the new economy business.n The new Fixed Income market of tomorrow may require an Application
Program Interface ( API ) to a single Fixed Income exchange.n T+1 must be incorporated into new technology.