Innovative Use of Drop Copies

£1,500.00

Software Capable of Deriving Simplicity from Complexity in Volume

GreySpark Partners presents a whitepaper exploring how, in 2016, drop copy data received from an exchange is increasingly being used by trading firms for risk mitigation purposes as well as for trade reconciliation and risk management reasons. This transition of drop copy data use from risk management to risk mitigation is occurring because of post-financial crisis regulations in the EU and US requiring trading firms to comply with new levels of pre- and post-trade transparency.

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The whitepaper reviews how the evolution of direct market access and sponsored access services offered by trading firms to their clients as part of an agency trading model caused the volume of drop copy data produced by exchanges to increase dramatically since 1999, especially given the growing prevalence of high-frequency market-makers. These trends present a growing challenge for trading firms to develop the capabilities needed to be able to store and process drop copy data for regulatory reporting purposes.

In an effort to address these concerns, technology vendors are developing a new generation of drop copy data management systems designed to provide trading firms with access to a database and unique data visualisation tools capable of allowing for the management of exchange drop copy data feeds in real-time. Crucially, these systems can be used by trading firms to simplify an often complex set of existing proprietary solutions designed to normalise and standardise the many different kinds of messaging protocol languages used by exchanges for transmitting drop copy data.

As a result, the whitepaper identifies an opportunity in 2016 for a drop copy data management system technology vendor to develop a utility solution for the financial markets industry capable of normalising and standardising all exchange messaging protocol languages. The creation of a drop copy messaging protocol normalisation utility could aid firms in processing the data for regulatory reporting purposes by allowing trading firms to manage the information in real-time rather than on a traditional end-of-day basis.

In assessing potential demand for a drop copy messaging protocol utility, the whitepaper presents the findings of a GreySpark survey of different types of EU and US market participants reviewing levels of satisfaction with proprietary or off-the-shelf drop copy data management systems. The survey found that – among trading firms considering exchanging a proprietary drop copy data management system for a vendor-provided system – the provision of a comprehensive messaging protocol normalisation layer as well as value-add features such as mismatched order alerts and latency reports increase the utility of inherent value of the system for the user.

Published on: 6 Apr, 2016

Innovative Use of Drop Copies – Table of Contents

  • 1.0 Contextualising Drop Copies
    • 1.1 Transitioning from Risk Management to Risk Mitigation
    • 1.2 Drop Copy Data as a Tool for Regulatory Compliance Globally
    • 1.3 Deriving Simplicity from Complexity in High Volume
  • 2.0 Making the Case for a Drop Copy Market Utility
    • 2.1 Envisioning a Drop Copy Data Management Utility
  • 3.0 Selecting a Drop Copy Data Management Vendor Solution
  • 4.0 Appendix
    • 4.1 Table of Figures