Technology could help prevent stock market crashes and abuse

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Technology could help prevent stock market crashes and abuse

Karl Flinders

Specialist supplierProgress Apamahas launched a real time complex event monitoring software,which it claims could prevent stock markets crashing and rogue traders committing fraud.

The firm's Risk Firewall is designed to monitorcomplex events in real time and block them if necessary to reduce the effects of mistakes or fraud.

The volatility of the stock market has been exacerbated by the use of algorithmic trading by investment firms. They use computer systems which automatically react to market conditions to buy and sell stock.

Progress Apama is introducing a system that can monitor complex event processing and stop automatictrading if a problem occurs. It could prevent trading activities running out of control and identify rogue trading paterns early, the supplier claims.

Progress Apama's Risk Firewallsits on top of Apama's complex event processing platform to monitor for risky trading patterns.

"Algorithmic trading allows thousands of trades to be processed in seconds and you need something just as fast to monitor them," said Dr John Bates, founder and general manager of Apama.

"The risk firewall monitors risk parameters and just like a network firewall it blocks certain traffic."

The firewall could be programmed to automatically stop trading if certain risk parameters were reached, he said.The firewall can be used to monitor and control trading desks and individual traders.

"The new Risk Firewall provides traders with the ability to deliver realtime risk evaluations that could pre-empt trades that exceed their firm's market risk tolerance," he said.

Apama customers in financial servicesincludeTurquoise and the FSA. But the risk firewall could also be used in other industries that use complex event processing technology. These include manufacturing production lines to spot faults quickly and in casinos to identify fraud.

Rogue trader Jerome Kerviel exploited high speed trading to single handedly amass £3.6bn lossesfor French investment bank Societe Generale. The junior trader used his knowledge of trade monitoring systems to carry out unauthorised trades without being detected.


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