1. 2 © 2007 bloomberg l.p. all rights reserved. the impact of computers on the financial industry...

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© 2007 Bloomberg L.P. All Rights Reserved.

The Impact of Computers on the Financial Industry

Kai ToBloomberg L.P.

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Personal background

Kai To

Graduated from King’s College London with a BSc. in Mathematics and Computer science

Been with Bloomberg since September 2008

Software developer in the Bloomberg Feeds team


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Agenda

Current financial markets

History

Use of computers

Software engineering

Questions


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Players in the market


Everyone who wants to stay informed

Investment banks

Brokers

Portfolio managers

Pension funds

Governments

Individual investors

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Where does Bloomberg fit in?


Financial data, news and analytics

Single source for information Bloomberg TV Trading systems Market data provider

Primarily a software house

Bloomberg Terminal Approximately 2800 programmers globally

290 of which are in London

Clients

Everyone from the previous slide

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Securities


Stocks and shares, equities

Own a stake, or a share of the company Voting rights Dividends

Bonds, fixed income

Debt instruments Issued by governments and corporations

Derivatives

Options for the right to buy or sell Agreed prices for buying in the future

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History


Information

Old boy’s network Newspapers Pink sheets

Calculations

Manual Bond sheets

Trading

Floor/pit trading Physical slips of paper

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Computers in finance


Yield calculations

Lots of variables

Valuations of complex securities

Even more variables

News

Categorised Sorted Intelligent

Alerts

Real time

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Yield calculations

Lots of variables


Even more variables

News


Alerts

Real time

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Yield calculations

Lots of variables


Even more variables

News


Alerts

Real time

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Yield calculations

Lots of variables


Even more variables

News


Alerts

Real time

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Real time alert


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Feeds

Streams of information over a network Trade prices, quotes and statistics Unformatted text Multiple sources, all different

Low latency

Important Bandwidth Efficient algorithms Length of cable

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Feeds


Low latency

Bandwidth Efficient parsing algorithms Length of cable Very important

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Feeds


Low latency

Bandwidth Efficient parsing algorithms Length of cable Very important

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Algorithmic trading

Computers are making the decisions A lot faster than humans Very complex and extremely secretive

We don’t do it

Algorithms are proprietary We supply the same tools to everyone

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Algorithmic trading

Computers are making the decisions A lot faster than humans Very complex and extremely secretive

We don’t do it

Algorithms are proprietary We supply the same tools to everyone

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Legal implications

How do you know who you’re trading with? Who’s responsible for computing errors?

Failures

Markets stop when computers break LSE outage, September 2008 KfW mistakenly sends €300 million to Lehman Mizuho trader sells 600000 at 1 yen

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Authentication

Who? – Audit trails and logs Where? – Regional differences

Security

Software – Bloomberg impossible to hack Physical failure – Hardware, networks Redundancy

Integrity

Bogus trades - Jérôme Kerviel Auditing and reporting - Law

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Authentication

Who? – Audit trails and logs Where? – Regional differences

Security

Software – Bloomberg impossible very hard to hack Physical failure – Hardware, networks Redundancy

Integrity

Bogus trades - Jérôme Kerviel Auditing and reporting - Law

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Software engineering in finance


Short release cycles

Time to market Clients want to be there first

If it works

Push out new software as soon as possible New enhancements constantly in the pipelines

If it goes wrong

Disastrous Short testing time Rollbacks can be an epic feat

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Proprietary

In house development Majority of departments have their own

development teams Very specific software

Client sits next to you

Rapid development Continuous client feedback

XP methodology When things go wrong…

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Proprietary

In house development Majority of departments have their own

development teams Very specific software

Client sits next to you

Rapid development Continuous client feedback

XP methodology When things go wrong…

Client’s sitting next to you

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Iterative development

Market changes quickly Short term

Ban on short-selling Requirements can change

Requirements

Speak to clients Don’t be generic Be ready for change Know the competition

Most importantly

Fast is as slow as we go

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Questions?


1. 2 © 2007 bloomberg l.p. all rights reserved. the impact of computers on the financial industry...

Documents

previous slide slide

important slide

future slide

bloomberg feeds team

reporting law slide

rights dividends bonds

impact of computers

physical slips of paper