‘The Internet of Things’ Comes to Wall Street

Terry Flanagan

The Internet of Things, by which devices communicate with each other, holds implications for the delivery of financial services.

“The Internet of Things, put simply, describes a concept where everyday objects and devices are connected to the internet, most likely wirelessly, and communicate at some intelligent level,” said Dr. John Bates, chief marketing officer for Intelligent Business Operations and Big Data at Software AG. “It’s going to be interesting to see how the internet of things impact the world of capital markets.”

New, agile systems are needed to handle the Internet of Things’ computational explosion of sensory inputs and reference data. By 2020, according to some estimates, there will be 50 billion things connected.

“The devices and sensors themselves are simply data sources,” Bates said. “The hard part is finding the right software architectures to support a new class of high-speed, streaming, decision-centric application requirements. Software is needed to analyze vast volumes of fast Big Data, compare it against patterns in reference data, and generate smart responses rapidly.”

At Software AG, Bates oversees Intelligent Business Operations. “It’s the ability to be able to tap into all forms of data out there, not just those you’ve got in the repository or a data warehouse, but those that are streaming at you rapidly,” he said. “It’s about comparing data in motion against data at rest, and behavioral patterns against what the behavior is right now.”

He added, “To build systems like algorithmic and high frequency trading, or real-time market surveillance, real-time pricing engines and so on, because the market moves so quickly and new patterns emerge so quickly that you need to build it over a flexible real-time platform.”

A typical use case is market surveillance, by which a firm can simultaneously tap into the trades that a particular trader is doing, news that’s coming out about what’s happening in the market, social media, and even the card entry system to a building.

For example, it might emerge that a trader has placed an unusually large trade just before a news article came out that moved the market and just after they were talking to another trader at another institution on a messaging network. Coincidentally, this trader is not taking holidays and is working unusual hours.

“That’s one of the key application areas, stopping rogue traders but before it gets out of control, because the quicker you can catch these things, the more likely you are to save money and reputational damage,” said Bates.

He continued, “In recent years, we’ve seen flash crashes, hash crashes, algorithms going out of control, Libor benchmark rate fixing, foreign exchange benchmark rate fixing. Now you’ve got metals price manipulation. Are you equipped to stop the next problem or are you playing catch up all the time?”

Software AG’s Apama and Terracotta products are built on an in-memory architecture that “can combine in-memory, historical process discovery and performance monitoring data with real-time business operational data streams,” he said. “Continuous analytics on streaming data can be performed to identify business patterns, which have happened or are about to happen.”

Featured image via Attila Toro /Dollar Photo Club

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