Complex event processing (CEP) is supposedly gaining traction on Wall Street as a way to analyze real-time streams of information and find patterns or correlations in unrelated data. But there are still many myths about the technology and confusion over the terminology, according to last week's Accelerating Wall Street conference hosted by Wall Street and Technology.
One of the main myths is that the technology is mature. According to panelists, CEP technology is immature. Another myth is that it's a sell-side only technology. A third myth is that it's out-of-the box and easy to use.
So far, bulge bracket brokerage houses have been the main users of CEP for algorithmic trading and other trading strategies. However, the bulge bracket firms using CEP are reluctant to disclose how they are using the technology for competitive reasons. "There is a big project going on," said Marc Adler, SVP, Equities and Head of Complex Event Processing at Citi told attendees at the conference, speaking vaguely. "It's a gigantic process that analyzes a lot of flows and comes out with interesting alerts," said Adler, who was careful not to reveal any details about the Citi project. After the session, Adler said Citi is working with multiple vendors, adding that "it's important to pick the best technology and best customer support."
Analysts agreed that bulge bracket firms are further down the curve with CEP, they see other types of capital markets firms doing real-time processing. "It's not a bulge bracket firm exclusive thing," said Adam Honore, senior analyst at Aite Group, who spoke on the panel. "We've seen it reduce development times 80 percent," said the analyst. He added, "Buy-side firms, hedge funds and proprietary trading firms are more secretive which is probably why there's a myth that it's a sell-side tools."
Instead of doing all their own custom coding, financial houses are turning to software packages available today that provide CEP infrastructure, such as Aleri, Progress Apama and Streambase Systems, said analysts, while others include Coral8.
There is also confusion over what the terminology means. While the term "event processing" has been around longer, Kevin McPartland, senior analyst at TABB Group, notes that CEP is used when multiple streams of data are being analyzed. "It's coming down to terminology and buzzwords but the concepts are the same," said McPartland.