The real-time operational risk and compliance monitoring solution for electronic trading that was recently released by Corvil builds on the company’s original network monitoring platform, providing visibility into a taller technology stack and allowing users to see the status not only of IT systems, but also the business that resides on them.
The solution plays into Corvil’s self-promotion from being a provider of network and latency monitoring to being a provider of operational performance monitoring, and is aimed at helping electronic trading firms and exchanges better control high-speed electronic trading systems, while complying with regulations. Essentially, the software, which is in the October release of CorvilNet, captures network wire data at a rate of millions of trading-related messages per second and then decodes, correlates and analyses the data to produce views of the data and alerts in real time. The data can also be stored for historical analysis or exported to external systems.
When the risk and compliance solution became available, Corvil CEO, Donal Byrne, said the company aspired to make CorvilNet ‘the de facto standard platform for performance, risk and compliance monitoring in the financial vertical’. To date, over 20 trading institutions have deployed the new release.
Corvil co-founder and chief technology officer, Raymond Russell, suggests the solution will give the company broader appeal than it had as a provider of network and latency monitoring, and that both existing clients – who can upgrade at no additional cost – and new clients will find the additional CorvilNet capabilities attractive. He explains: “Initially, there are more use cases for the solution in existing deployments, but we expect to attract new clients who are not particularly interested in latency monitoring, but want visibility into the state of trading and, as a result of capturing data from the network, an independent source of data for risk systems.”
Corvil’s rise to operational risk and compliance monitoring has been made in stages. Its early products monitored activity at the network layer, providing visibility into network packets. The ability to measure delays and end-to-end latency across a network was then added, supporting trading with latency information. Then, says Russell: “People wanted more, so we added the next layer to the software. This decodes messages and tracks transactions across the network. This gave users of CorvilNet latency monitoring and the ability to track transactions.”
In developing the October release of CorvilNet, the company added a business layer to the technology stack that includes decoders with intelligence about the state of trading systems and trading at exchanges. Russell says: “This means the performance of infrastructure and its impact on trading can be seen. For example, it is possible for a broker to see if fill rates are lower than expected.” As well as tracking individual transactions, the company has created an aggregation mechanism that can provide executive summaries of activity across transactions to support a view of trading from the business perspective. Exchanges, by way of example, can see trade flows and brokers can look at individual client’s order flows.
Russell says: “The primary purpose of deploying this release is not about latency, but about IT risk and business risk. People have risk systems in place, but many have weaknesses as risk monitoring depends on reports from trading platforms and these may have gaps. CorvilNet provides an extra layer of monitoring as it takes data directly from the network and decodes messages to provide a view of transactions and exposure.”
In terms of the technology build for risk, compliance and business monitoring, Corvil worked with customers to illicit requirements and carried out the work in house, focusing particularly on decoders. Russell explains: “We have a team dedicated to building decoders. Initially, we developed decoders to decode messages off the wire, but we have enhanced that with decoders that have knowledge of trading models.” The mechanism that aggregates data from these decoders operates irrespective of trading protocols and summarises the state of trade. “The biggest challenge is keeping the system operating at the message rates that give large brokers and exchanges the data they require,” he adds.
The solution includes a web services application programming interface for enterprise integration and access to live and historical metrics, and packet and transaction capture. There are also dashboards for real-time monitoring and graphical user interfaces designed by Corvil. The dashboards include CorvilLens – a module requiring a separate licence – that provides an integrated real-time network, application and business view that can be updated every 10 seconds and can also be used to query data. Alerts can be based on user-defined events and set to restrict trading or alert staff to financially threatening events.
Russell says many users of the CorvilNet release are exporting low level data and building dashboards for compliance purposes. He explains: “The CME, for example, requires trading members to keep all the FIX messages they send and receive, so CorvilNet is being used for this. It is also being used by exchanges to prove compliance with regulations such as Reg NMS.”
In terms of market positioning, Corvil’s move up the value chain has broadened its potential customer base and could pitch it against new competition. Russell says: “We don’t see vendor solutions from companies such as ITRS, HP, IBM and Computer Associates being used by market participants for real-time operational risk and compliance monitoring in the environments we are being selected for, but we could appear in the same space as these companies as a provider of a feed of data that is authoritative and independent, by virtue of being based on wire data, and which can capture, process, filter, summarise and enrich data at scale and in real time.”
“From a competitive standpoint, what we do see is mostly proprietary applications developed in-house at banks and liquidity venues, but they don’t deliver the benefits of having an independent third-party monitoring system, which is why financial institutions are now coming to us to provide this outside validation.”
Beyond electronic trading infrastructure and building on its role as a provider of operational performance monitoring, Corvil has added real-time monitoring of database systems, web-delivered applications and voice over IP and video to the November release of CorvilNet, as well as reporting using the company’s business value dashboard that offers a view of performance, health and activity across systems and services.