Trading with the Two Types of EP
After writing about the Two Types of Event Processing (EP), I have mostly gotten requests for examples. And many people want trading examples. I will try to eventually write a detailed post about trading and EP, but for now I will have to settle for a post targeted at front office developers.
Here is the basic breakdown of EP for trading:
Detection Oriented Event Processing
- Signal generation – this includes liquidity signals for smart order routing
- A lot of (but not all) real-time risk calculations – but using the calculations is Operations Oriented, see below
- A lot of (but not all) real-time trade monitoring
Operations Oriented Event Processing
- Order management
- Position management
- Real-time P&L
- Order routing and checking against limits or calculated risk
- Responding to trade exceptions and events from real-time trade monitoring
- Old style smart order routing (e.g. route to each venue, cancel if not executed in a short time)
- Some or most crossing and trade matching – this might be surprising. I need to analyze whether combinatorial matching falls into Operations or Detection Oriented EP.
- Market data aggregation
Think about that breakdown and picture how they place different requirements on an EP (CEP) system.
I will elaborate more in the future. We will find different requirements and usage scenarios for an EP system. In fact, we find that different EP systems have very different strengths and weaknesses for the two different types of EP.
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