A Leading Equities and Derivatives Clearing Firm Transforms and Modernizes their Risk and Margining Platform to Provide Increased Transparency
The solution delivers a modern cloud-based streaming architecture, resulting in a scalable, high-performance data and computing fabric.
The client clears billions of options contracts per year across 16 exchanges worldwide and is the largest clearing corporation for listed equities options worldwide. The client is the buyer to every seller and the seller to every buyer in the U.S. listed options markets, responsible for maintaining liquidity and the efficient trade flow in these markets. In the last few years, the explosion of volume in the equities market and listed equity derivatives has put a tremendous strain on existing technology such that legacy systems could curtail future growth. By rebuilding key systems in AWS, the client has ensured a smooth and unrestricted path to continuing to fill their key mandate.
The trading volume of equities derivatives has increased exponentially since the onset of options trading in the early 1970s. Even before the Covid-19 pandemic, the client had embarked on a multi-year technology modernization initiative (Project Renaissance) to strengthen its foundational capabilities and better serve market participants. During the Covid-19 pandemic, both trading volume and volatility increased sharply across listed equities and equities derivatives models worldwide, requiring systems that scale to levels uncontemplated even a few years ago. The client selected Ness to help it rebuild its market risk and margining platform to provide an environment for intra-day risk management, intra-day computations, pricing, and re-valuation. The new system enhances the efficiency and speed of margin, stress-testing, and back-testing calculations. The new system also increases transparency and insight for clearing members into exposures, allowing ad hoc queries and real-time processing.
To implement these new capabilities, the client partnered with Ness to transition their Risk and Margining system from a batch-based overnight process to a near-time, event-based system. The Risk and Margining system is an ideal candidate to leverage a modern cloud-based streaming architecture resulting in a scalable, high-performance data and computing fabric.
Ness led the architectural design phase and recommended AWS as an infrastructure solution to scale and deliver quickly utilizing a computational platform based on Kafka and Flink. The combination of these two technologies – Kafka as a scalable messaging platform that is ideal for market and trading data and Flink as a stateful processing engine that can efficiently scale to manage massive, parallel processing streams – provided a foundation for the client’s needs in the future.
The application built by Ness enables the client to:
- Leverage Infrastructure as Code to allow each developer to spin up and test variable configurations of a Kafka and Flink application in AWS using self-service tools
- Provide massive and near-perfect scaling to allow “overnight” batches every 20 minutes
- Provide the capability to execute “micro-batches” of calculations, allowing for the calculation of intra-day risk
- Demonstrate control order, aggregation, and impact on performance
- Monitor and track drift to the source and between any two consumers
- Manage capacity and costs in AWS