Trade repository and control system Case Study from the 90s

Here is a blast from the past a case study I came across while cleaning my office, I wrote it in the late 90s for my old company Dataware Solutions (acquired by SunGard). What it shows is the technology may change but the challenges remain the same.

It’s 2:00 pm in New York City and trading on Wall Street has been humming. It is just another high volume trading day with high-risk takers adding more holdings to their portfolios while others sell their lot. Trades are entered into the computer simultaneously by hundreds of portfolio managers, and some of these entries are unwittingly entered inaccurately, or not yet registered into the system to be accepted. This is not uncommon, however, since the average total accuracy of entries is 95%.

When a crisis hits - the market soars - trading is high - and an overriding concern in the brokerage firm is to ensure that all deals are executed in a timely manner. To accomplish this, traders must be able to gain access to the trading and accounting information to measure the performance of their deals. The reconciliation of this data is key to their achieving this goal. Therefore, the settlement cycle must be shortened.

Most trading systems place invalid entries into a scrub queue for review by an analyst responsible for identifying any anomalies. Data discrepancies often occur as data with different values are moved among different trading and back office systems. On a high volume day, a firm without an automated repository scrub will find the task of manually reviewing even 5% inaccuracies a laborious feat to resolve in a single day.

How, then, can portfolio managers be assured that they are receiving accurate information to continue to make deals by the end of the closing day? Traders and portfolio managers can only hope and pray that their entries are not waiting in that manual queue on a high volume trading day, unless the firm has invested in an integrated repository scrub solution. A leading investment firm in Boston realized the benefits of investing in such a solution.

Leveraging Information Assets

The investment firm reviewed their existing technology infrastructure and determined a need for a standardized clearinghouse that would integrate their best-of-breed applications. The firm wanted to continue to use their installed front and back office applications, but also wanted to extract data from all of its trading systems, accounting applications, custody sub-systems, and synchronize the distribution of this data to its applications. The major business requirement for the firm was to integrate its best-of-breed applications, thus making data more accessible to its traders, at a lower cost.

The firm wanted a new information technology infrastructure that would bridge the gap between its different systems. This new infrastructure had to meet three critical business criteria.

  1. Due to changes made in trade settlement rules, it became increasingly important for brokers to take immediate action on an entry to maintain a competitive advantage.

  2. The firm has fourteen different systems from which portfolio managers collect data. They needed a solution that would help their portfolio managers query any or all of these systems to respond quicker to customer requests. They needed a more disciplined approach to collecting and analyzing data.

  3. The firm’s information technology infrastructure is designed around multiple systems that support incompatible data formats. They wanted to share data between these trading systems, but did not want to sacrifice data integrity.

This prestigious investment firm prides itself for providing its customers consistent and accurate results. Consistent information, therefore, had to be facilitated by the technology solution. They wanted a solution that would bridge its best-of-breed systems (accounting, trade and custodian), and provide a single control point from a standardized clearinghouse.

Having successfully contracted Dataware Solutions for past projects, the firm was confident that Dataware had the financial background and technical expertise to implement a solution that addressed their critical business issues. Dataware earned a solid reputation for delivering complete solutions to other financial institutions. Dataware Solutions was selected for its disciplined approach in designing information technology infrastructures.

A Standardized Clearing House

Dataware reviewed the firm’s current method of distributing messages between its incompatible trading systems. By thoroughly analyzing their requirements, Dataware concluded that they needed a solution based on a multi-tiered client/server distributed architecture. The goal was to design a foundation that, when implemented, linked together mission critical applications, thus bridging the data inconsistencies among the various systems.

Dataware, an information technology provider, called upon its partner alliances to build this integrated trade solution. Dataware integrated the Open EnvironmentTM Intelligent middleware into the Client solution to quickly deploy a multi-tiered architecture. This architecture provided Dataware with the foundation to separately build and deploy the graphical user interface (GUI) from the business logic and from the databases/applications.

The entire solution is architect to inter-operate in a heterogeneous database environment that includes Oracle, FoxPro, DB2, proprietary, Autofax, and ASCII database formats within multi-platform environments that include VAX/VMS, DOS, UNIX, MVS, and Microsoft Windows operating systems.

An Integrated Architecture

Dataware bridged the various trading systems by implementing a Trade Repository solution, and provided an intuitive method for portfolio managers to query and scrub messages from the Trade Repository by designing a Trade Control solution. The Trade Repository is the standardized clearinghouse that Company needed to control the distribution of data and messages (security trades or foreign currency deals) between its trading systems and applications. Messages are distributed between the front office, repository, and back office using Platinum’s InfoPumpTM. The following diagram illustrates the integrated architecture designed by Dataware.

Customer Satisfaction

Dataware’s Trade Repository system successfully bridges the various trading systems by consolidating the data and translating the various data values. The information is now delivered accurately and immediately to portfolio managers enabling them to create heterogeneous portfolios. The Trade Control system reduces operational costs by simplifying the method of reconciling data discrepancies.

Dataware’s expertise in building multi-tiered integrated solutions gave this firm a foundation that accommodates the integration of additional applications --- a solution designed with greater efficiencies. The graphical user interface provides the user with a consistent and easy-to-use method to query and scrub data received in the central repository. The integrated business logic rules provide the user with instructions on how to settle and confirm a trade entry. And the integrated management functions monitor the location and status of a trade as it is processed.

In summary, the investment firm is very pleased with the benefits it has achieved with the Dataware Trade Repository and Control Systems. It solved their major business requirement - making data more accessible to its traders at a lower cost. And it met the firm’s criteria for a new information technology infrastructure. The Trade Repository and Control system even exceeded the firm’s expectations by:

  1. providing real-time data delivery to its portfolio managers

  2. improving the confirmation of prices for trader deals

  3. building a foundation for a series of future repositories.

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