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Market surveillance | Ancoa | Stefan Hendrickx
Helping the overstretched
data scientist
By Stefan Hendrickx, Founder and Executive Director at Ancoa.
Continuing from our article in the Spring issue
“Market surveillance: From cost to value creation”,
we move our focus to the analytics use cases of
Ancoa, the market surveillance and monitoring
platform. We describe how the platform is
leveraged by our clients to execute specific data
mining tasks, helping the front office gain real
insight into both surveillance and risk.
So, how does market surveillance relate to
quantitative analysis? As Kara Scannell described
in the FT in May 2014 in her article “SEC: With the
programme”: surveillance of Wall Street and the
financial markets at large requires quant skills and
high-tech tools in order to reveal market abuse
concealed within huge amounts of transactional
data. But these quantitative skills, and the data
scientists who are able to do this analysis, are
scarce and hardly affordable. Many firms, not only
financial ones, want to make use of their precious
data crunching skills. The goal is to maximise insight
by optimising the workflow of your data scientists.
A number of quants/data scientists at sellside
“The benefits of
having a central
data repository for
analytics easily
outweighs the
implementation
challenges which have to be managed.”
Stefan Hendrickx, Founder, ANCOA
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14Q2 Best 25.indd 82
firms and exchanges looking to satisfy the
increased need for analysis have worked with
Ancoa. From this experience we have found that
data scientists and quants often spend more than
half of their time preparing data sets for analysis.
This unfortunate reality makes it particularly difficult
for them to find hidden correlations, which then
leads to missed opportunities. Automation in data
sampling or “scooping” boosts productivity, and
this is where Ancoa can work with firms to help
data scientists reach their potential. It is possible to
scoop tens of thousands of specific data points out
of hundreds of millions, and sometimes billions of
transactions, with minimal effort.
Ultimately, the aim is to provide a single
analytics environment which runs on top of a single
data source. Creating a central data repository
for market analytics, which stores both current
and historical data on the market has several
benefits. At a high level, businesses operating
this kind of structure become more streamlined.
Different departments learn to speak a common
language through shared technology, and there
is a reduction in IT overheads and duplication in
data storage. Most importantly however, data
scientists are able to apply fast and automated
data scooping across back and front office. Within
this framework, data and the associated analytics
used for back office market surveillance and front
line traders becomes a ubiquitous feature of an
organisation’s structure.
There are implementation challenges in taking
a ubiquitous approach to data and analytics.
Essentially, it becomes necessary to apply
the proper level of governance to ensure that
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Market surveillance | Ancoa | Stefan Hendrickx
Fig 1: displays the order book for one security, rendered as a price-time priority queue, with filtering applied on market participants and
order volumes to analyse positions in the order book over time.
©Ancoa Software 2014
individuals whose behaviour is being monitored do
not have access to the alerts being analysed by
those doing the monitoring. As a consequence,
ensuring that the proper level of governance is
put in place is essential in preventing the leakage
of information. Nevertheless, the benefits of
having a central data repository for analytics easily
outweighs the implementation challenges which
have to be managed.
A flavour of the types of analytics used by
exchanges includes:
s 3TUDYINGMARKETSTRUCTURE
s )MPACTOFRULEBOOKCHANGESANDNEW
connectivity services on behaviour across
different groups (buyside, sellside, market
makers) and individual market participants;
s "UILDINGORDERBOOKSFROMPROPRIETARYDATA
s %FFECTOFPOLICIESONLIQUIDITYCORRELATIONS
s %FFECTSOFPOLICIESONMARKETSTRUCTURENETWORK
analytics;
s "EHAVIOUROFINDIVIDUALMARKETPARTICIPANTSIN
relation to position in order book;
s "EHAVIOUROFGROUPSORMARKETPARTICIPANTS
(buyside, sellside, liquidity providers) relative
positions in the order book for a specific
security.
A single data repository, at firm level, for analytics
has additional benefits for a wide range of firms.
Market makers are able to extract statistics on
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the performance of individual algorithms. Buyside
firms get statistics on different sellside venues, on
execution quality and look for substantial trades
in the market that are not their own. Sellside firms
are easily able to measure performance between
traders. Since the application of analytics is
immensely diverse, and some of the insight that
firms attempt to understand is proprietary, Ancoa
has an application programming interface (API) that
allows firms to develop their own metrics without
disclosing them to third parties.
Ancoa’s key focus is contextual market
surveillance. As the article attempts to illustrate,
using a real-time system capable of capturing and
analysing transactional data in a single repository,
facilitates analytics and reports as a natural
progression. Ancoa has addressed the corporate
data governance issue by offering granular control
of user rights and roles, and strong encryption
practices. This enables best of breed practices
of IT governance levels allowing members of staff
to access only the appropriate types of data and
applications and avoids inappropriate information
diffusion across business functions. ■
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