USER CASE
High-Fidelity Market Simulation for Front Office Products Target: Front Office Developers, Quantitative Traders and Analysts.
CHALLENGES AND GOALS
► To enable realistic simulation system behavior within actual or artificial markets for use in development, design validation, tuning and comparative analysis.
► To provide a convenient way to compare simulation across multiple data sets, code versions and business scenarios.
CASE DESCRIPTION
To prove and test products a realistic system- and finance- testing must be done together – it is not enough to test systems’ performance and functionality outside of realistic financial simulation. Understanding relevance of test results and of system’s performance at crucial market situations require technically sophisticated testing conducted on real-market data at real-market speeds, using realistic latencies and configurations. We parameterize scenarios by loading bulk of actual or simulated high frequency data into a data converter.
If necessary, Converter prepares the data for simulations by removing gaps and restoring causality between order book events and trades. Data is loaded into Allied Data Engine or Commercial Data Engine connected to BEST Studio via an API. At the start of tests and simulations the data is loaded from the database into Market Data Simulator. Within Market data Simulator realistic latencies are added to different data streams based on simulated distances to between data sources implied by previously defined network geography.
BEST Studio allows user to create and group tests and simulations into scenarios defined by common data, market rules, configuration settings and test types. At the scenario is loaded into BEST Studio the Exchange Simulator communicates with Market Data Simulation and automatically parameterizes its market models based on market rules defined in exchange configuration depositary and data sets presented by Market data Simulator At the same time, BEST Studio links all components of the simulated environment using communication protocols requested by the customer (native exchange protocols, FIX, etc).
Front Office Product that is being tested is linked to all virtual components defined within BEST Studio creating a virtual environment that from the point of view of Front Office product is very much like from real production environment.
As Front Office Product runs within virtual system and interacts with Exchange Simulator, the Simulator responds using appropriate internal models:
- It creates virtual reality affected by activity of tested system and tracks it in parallel with actual historical reality.
- It streams to the system alternative reality market data affected by the system's previous activity.
- Depending on the complexity of the simulation, it can be adjusted by turning on and of various modules such as: "competition for spread", Smart order routing activity, dark pool activity. The operator of the system can choose the speed of the simulation: from step-by-step, used by developers and in micro-level analysis - to fastest possible, used to generate large body of results in production built. The results of the simulation are observed in real-time and batch modes using Business and Trading Monitor.
Those tools carry proprietary metrics designed to estimate performance features of the system and the impact of computational efficiency on business success: - Business Monitor allows the operator to define custom metrics, blending market data and system activity, synchronizing to even resolution. - Trading Monitor can be used with Exchange Simulator as well as in production environment - to compare results of simulated and live activity. - Business monitor accepts logs of the tested system to create metrics. These metrics contain hidden variables, necessary for detailed analysis of system activity – e.g. verifications of fill probability models governing system behavior. Throughout all the simulation session, the operator can index and save all the results of any interesting phenomena - for future analysis.
REQUIRED COMPONENTS
► BEST Studio
► BEST Data Manager and Data Converter, or client’s own high frequency data storage solution
► Market Data Simulator
► Exchange Simulator with High-Fidelity Model Package and Business Object Library containing rules of specific exchanges
► Activity Monitor with Business & Trading Package.