- New regulations are challenging trading firms to utilise drop copy data received from exchanges in real-time for risk management and trade reconciliation
- A GreySpark Partners survey of existing proprietary and technology vendor drop copy data management systems found that demand for off-the-shelf solutions will grow in the future
LONDON – 11 April 2016 – A new whitepaper from GreySpark Partners, a leading global capital markets consulting firm, explores how a new generation of technology vendor drop copy data management systems are emerging in 2016. Compared to the drop copy systems built in-house by trading firms for internal and client reporting trade reconciliation and risk management purposes, the new generation of drop copy data management systems are specifically designed to assist buyside and sellside trading firms expand the ways in which they can use drop copy data for regulatory reporting purposes.
Drop copies – which are a form of electronic receipt of an order placed on an exchange – are typically processed by trading firms on an end-of-day basis. However, since the onset of the financial crisis, regulatory reporting requirements in the EU and US are now challenging trading firms to develop the ability to manage and process drop copy data feeds in real-time in order to comply with new pre- and post-trade transparency mandates.
Managing a high volume of drop copy data in real-time is difficult for many trading firms because of the need to normalise and standardise the different messaging protocols and symbology used by different exchanges to categorise and organise the information contained within a drop copy report.
As a result, technology providers are beginning to develop systems capable of normalising drop copy data via a layer of analytical software. The systems also typically include visualisation tools that allow a trading firm’s chief technology officer or head of electronic execution the ability to explore and analyse both reconciled and unreconciled drop copy data as a means of monitoring client trading activity for both internal compliance requirements as well as for regulatory reporting purposes.
GreySpark believes that many of these new types of drop copy data management systems present an opportunity for the development of an independent drop copy utility solution. This would be capable of normalising and standardising drop copy data as well as provide users with a dashboard interface for the real-time management of all the drop copy data feeds from the leading equities and futures exchanges.
Russell Dinnage, GreySpark lead consultant and report co-author, said: “Our survey of a number of different types of market participants, using both principal and agency trading models, has identified a level of demand for off-the-shelf drop copy data management systems. This is most apparent if the trading firm is using an agency trading direct market access or sponsored access service model to allow their clients to trade on exchanges in the firm’s name. Such systems exist already in the marketplace on an off-the-shelf basis and, when combined with a messaging protocols standardisation and symbology normalisation layer, present a compelling case for the ability of the new generation of drop copy data management technology to become an outsourced utility for trading firms, rather than remaining a complex, in-house technology burden.”
For further information on GreySpark’s research, please e-mail: firstname.lastname@example.org