Corvil Showcases OTR Solution at Deutsche Börse Open Day

Our new Intelligence Hub analytics platform helps ensure intraday trading always stays compliant

An annual event in the Corvil calendar is the Deutsche Börse IT Open Day, when the Frankfurt-based exchange provides it members with technical updates on the latest (and planned) enhancements to the Eurex and Xetra trading systems. We attended last week with a booth in the main atrium to hear the keynotes from one of the most technically progressive venues and to network with its members, many of whom are Corvil customers.

In January this year, the MiFID II regime introduced new scrutiny and sanctions around Order to Trade ratios (OTR) in an attempt to mitigate the risk of algorithmic trading systems creating disorderly trading conditions.

To stay compliant with the new regulations, trading members need to be able to track the ratio of unexecuted orders to trades intra-day, and in as close to real time as possible so that corrective action can be taken to ensure regulatory violations do not occur. Sanctions can be significant, with the threat of fines of up to €1m and a ban from trading for 30 days.

Matt Davey and I had the opportunity to deliver a half hour presentation and demo of our predictive Order-to-Trade Ratio (OTR) solution built upon our new Intelligence Hub platform. The talk certainly caught people’s attention driving visitors to the Corvil booth afterwards.

Real-time monitoring

Deutsche Borse continuously tracks OTR behaviour per-product and per-firm during market hours, issuing a report at the end of each trading day, which includes evidence of any violations. But of course, this is too late for the trading member to take corrective action, as the horse has already bolted and the firm are left to handle the consequences.

This is where Intelligence Hub comes in. By providing continuous insights into trading activity including Order to Trade ratio throughout the day, Intelligence Hub generates alerts that allow time for the firm to intervene and take corrective action. We achieve this with predictive analytics powered by machine learning.uUsing regression modeling that combines intraday data with historical data. Behaviour is learned on a per-instrument and per-product basis, enabling continuous predictions to be made and compared against exchange-mandated thresholds.

It works in fours steps:

  1. Monitoring – OTR is continuously monitored per product and in real-time. The calculation is made firm-wide, aggregating data across multiple algos and trading desks.
  2. Alert – Predictive analytics are applied to per-product OTRs which are tracked against limits imposed by the exchange. Alerts are raised when the algorithm predicts a violation within the remaining trading hours.
  3. Analyse – Enables the firm to identify the root cause of excessive OTR, be it: trader, desk or algo and also to understand behavioural change and anomalies.
  4. Act – The firm can course-correct the trading strategy to reduce OTR and avoid end of day violation.

Feeding Intelligence Hub are Corvil appliances, which are capable of acquiring network packet data at scale. Working across highly distributed trading environments, spanning multiple desks and algorithms; they collect granular data that can now be surfaced in Intelligence Hub dashboards for visualization and analysis with unprecedented speed and accuracy.

Deutsche Börse is a long-standing customer – they use Corvil to monitor the performance of market data as it travels from the exchange to their regional POPs. Last week’s IT Open day it was a great opportunity to connect with many of their members, and introduce them to a solution, that will help them avoid fines and sanctions by staying within the guiderails of MiFID II RTS-9.

Find out more about Corvil’s self-service trading intelligence and OTR Solution.

James Wylie

James Wylie, Director, Technical Product Marketing
Pico is a leading provider of technology services for the financial markets community. Pico provides a best-in-class portfolio of innovative, transparent, low-latency markets solutions coupled with an agile and expert service delivery model. Instant access to financial markets is provided via PicoNet™, a globally comprehensive network platform instrumented natively with Corvil analytics and telemetry. Clients choose Pico when they want the freedom to move fast and create an operational edge in the fast-paced world of financial markets.