OTC Markets Group, operator of the OTC Link ATS, is implementing technology to gain a view into the latency across its markets. It has tapped latency-monitoring software from Corvil with the aim of utilizing network data to optimize trading analytics, and to understand and quickly act on all activity across the business.

“The main business issues we are trying to address is having full end-to end measurement of latency, for a number of reasons,” Michael Modeski, president of OTC Link, told Markets Media. “One, to be able to identify any issues that may exist within our applications that aren’t easily identifiable to us. And second, so that we have this level of statistical data on a real-time basis, so that we can remediate issues or potential issues much more quickly for our subscribers.”

OTS Link is deploying Corvil to monitor network connections at the entry and exit points of its trading system to ensure users have a complete record of trading activity. “What we want to be able to do is gather these analytics real time and use those analytics to improve our services for our subscriber base,” said Modeski.

OTC Markets operates three marketplaces: OTC QX for U.S. and non-U.S. securities, OTC QB for venture and growth-stage companies, and OTC Pink for distressed equities. Overall about 10,000 U.S. and international securities are on one of these marketplaces.

From an issuer point of view, OTC Markets’ primary user base are its QX companies, which range from ‘name’ companies like Roche, Adidas, and Lufthansa, to small Canadian mining and minerals concerns.

OTC QX has seen its listings of American Depositary Receipts accelerate since 2008, when the SEC amended Rule 12g3-2(b) to automatically exempt thousands of non-U.S. companies from SEC registration and, as a result, from the Sarbanes-Oxley Act.

“Prior to that, most ADRs that traded in the U.S. had national (home-country) listings, but with the implementation of SarbOx, it made it costly for them to have a U.S. primary listing on Nasdaq or New York because they had to keep two sets of books, one set of accounting books in home country requirements and one in U.S. GAAP,” said Modeski. “Our over-the-counter participants have grown tremendously over the last six years (since the 12g3-2(b) amendment) with the addition of ADRs into the marketplace.”

OTC Link does not operate a centralized matching engine and does not anonymously match trades. “We do everything with full attribution, meaning that our subscribers, who are Finra broker-dealers, are known by their MPID (Market Participant Identifier) on our system by displaying that within their quotes and then also by displaying that within each one of the trade messages that they send back and forth between one another for potential execution,” said Modeski. “The counterparties know who each other are through the entire process.”

By tapping data at the endpoints, Corvil is able to provide a precise and real-time picture on performance and delivery without increasing latency.

“You’re able to get a high level of granular information not intrusively because we don’t run on any engines or any kind of servers,” said James Wylie, director of technical product marketing at Corvil. “It’s all taken from the network in real time and stored externally, which gives you a lot of scope for integrating other solutions but also using that data natively within Corvil as well.”

Corvil is broadening its scope to encompass not only network monitoring but also capturing data off the network to feed real-time analytics. “What we’re seeing now is a shift from pure latency monitoring for performance, to feeding the Corvil data into risk engines, and into big data as well,” said Wylie.

SEC Rule 603, for example, requires that any market information distributed by a broker or dealer (including ATSs and market makers) be made available to any securities information processors on terms that are fair and reasonable. “When people are building out trade databases for regulatory compliance for instance, they can use the Corvil data that’s derived from the wire with accurate time stamps and complete coverage.”

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