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© Ed Flynn & Learning Modules These notes have been prepared by Ed Flynn, an FISD recognised trainer. (updated 10 March 2014)

Dear FIA Candidate Welcome to the course notes for the Technology Section of the FISD FIA Syllabus. This module is designed to prepare you to take the FISD FIA exam. By using a combination of the videos and course notes - and working through the quiz - you should be ready and feel confident to pass the exam. (One without the other will not work effectively). You have 60 days to view the videos as many times as you wish and you can also complete the quiz as many times as you wish during this period too. It is however advised that you download and save this pdf so that you can refer back to it should you need to after the 60 days have expired. We have structured the course notes to match the order of our videos and have referred them back to the FISD syllabus. There are however many occasions when the sequencing of the videos is different to the order of the FISD syllabus - but it is all covered. The course is divided into four main sections: Section 1: The Markets Section 2: The Data Section 3: The Technology (covered in this module) Section 4: The Industry

To book your FISD FIA exam, please visit http://siia.net/fisdpc/test.asp and click where it says “Register to

take the FIA exam”. When you pay for the exam please use discount code lmod to receive a $150 discount on the exam fee. If you have any problems please contact the FISD co-ordinator David Anderson at email: [email protected] Good luck! Best wishes

Tracey Huggett Finance Modules PS: We welcome your feedback and comments at [email protected]

http://siia.net/fisdpc/test.asp

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SECTION 3: THE TECHNOLOGY

FISD general overview for the section 3 THE TECHNOLOGY (FISD Syllabus Section 3) FISD syllabus requires you to: Have a broad understanding of the various technologies that are deployed in association with market and reference data and how they are used. While you are not expected to know all of the following in any kind of detail, you are expected to recognise the key phrases and understand the broad concepts and overall context in which they are relevant. • Hardware • Operating Systems • Applications • Software/Application Development • General Computing Terminology • Connectivity • Stability • Datafeeds • Data distribution • Workstations • Instant Messaging • Transaction Products - Desktop • Development, Implementation, Management and Support • System Development • Implementation • Support • Applications and Associated Technology • Application Types • Algorithmic Trading • Price Contributions • Types of Information File • Enterprise and Reference Data Management • Basics of Back Office Data Distribution Systems


Finance Modules Video: The Technology – Module 1

Hardware-Software Time: 3 min 52 sec

TECHNOLOGY BASICS & TERMINOLOGY (FISD Syllabus 3.1)

FISD syllabus requires you to: Understand what the following basic technology elements are and their relevance in the world of market and reference data

HARDWARE (FISD Syllabus 3.1.1) FISD syllabus requires you to understand: • What is hardware – Processor – Memory – Storage (disk, tape, USB/memory stick, SAN) – NIC (Network Interface Card) – KVM (keyboard, video and mouse), switches

FINANCE MODULES COURSE NOTES: • Hardware and Software – Hardware is the physical aspect of computers, telecommunications and other technology - the objects you can touch. Software on the other hand is programme and instructions that direct the hardware to perform tasks. • The processor or CPU (Central Processing Unit) is also commonly called the microprocessor – Processes the instructions that it gathers from decoding the code in programme and other files. Its primary functions are to fetch, decode, execute and writeback – Typically measured in MHz • Memory – Computers use memory to hold the data currently in use and the data necessary to operate a computer – There are two types of memory: – Read-Only Memory (ROM) which contains the data needed to operate the computer – Random Access Memory (RAM) which holds the volatile data created by programmes and documents that are in use. When the computer is switched off the data stored in here is lost. – Typically measured in Megabytes or even Gigabytes • Storage (disk, tape, USB/memory stick, SAN) – Computers save data to the hard drive but users may also want to use portable storage devices such as USBs to transport data from one computer to another or to back up the data in case of a hard drive crash – SAN (Storage Area Network) is a type of local area network designed to handle large data transfers typically for data storage, retrieval and replication – Typically measured in Megabytes or Gigabytes


• NIC (Network Interface Card) – This is the hardware that is added to the machine to allow it to communicate with the network • KVM (keyboard, video and mouse) – Keyboard – the “type-writer” of the computer – Mouse – used to control the position of the cursor on the screen – Video – video output from the PC that goes into a screen (visual display unit – VDU) • Switches (network switch) – This is the hardware that joins multiple computers together within one local area network (LAN) – A LAN allows networking capabilities to a group of computers in close proximity (i.e. in an office building). A LAN is all devices in the same broadcast domain and switches forward these broadcasts. It is useful for sharing resources (e.g. files and applications). LANs can be connected to other LANs, WANs or the internet – WAN (wide area network) is a network that covers a large geographical area such as a city, state, county or country

OPERATING SYSTEMS (FISD Syllabus 3.1.2) FISD syllabus requires you to understand: • What is an operating system – Windows (various) – Unix, Linux – Mac (Apple)

FINANCE MODULES COURSE NOTES:

Operating System: The operating system is one of the most important pieces of software - it controls the overall operation of the computer. Some examples are: • Windows – Windows 7, NT, XP, Vista • Linux – Linux is an open source system that works on both PCs and Mac: www.linux.org. Open source means that the original software developers allow future software developers to change and adapt the source code of the software product (in this case an operating system). The vast majority of software is not open source and consumers are forbidden from touching the source code. • Unix – Unix is not open source: www.unix.org/what_is_unix.html – However some organisations have adapted Unix and created their own versions and it’s these versions that may or may not be open source. The most popular versions of Unix are Sun Solaris, GNU/Linux and MacOS X. • Mac – Mac’s (Apple Macintosh computers) operating system is called OS X, with the different versions named after big cats i.e. Tiger, Leopard, Lion. Major components of MacOS X, including the Unix core, are made available under Apple’s open source licence: www.apple.com/opensource.


APPLICATIONS (FISD Syllabus 3.1.3) FISD syllabus requires you to recognise: • Spreadsheet (incl. MS Excel, Functions, DDE, RTD, Macros, VBA) • Databases (incl. SQL and database queries) • Custom applications (in-house, vendor) • Browser, messaging, email

FINANCE MODULES COURSE NOTES: Applications: • Spreadsheets (Excel and Excel functions) – desktop applications that allow users to easily input data, create models and perform calculations. Some terminology and basic functions you should be aware of are: – DDE – dynamic data exchange – mechanics to link into Excel – RTD – Excel’s real time data function – Macros – coded methods to automate Excel or other application – VBA – visual basic – a programming language • Databases (a common database structure is SQL or structured query language which is a powerful programmatic database access utility) • Custom applications – “bespoke”, tailored to meet the specific interests or unique application needs of the user • Browser based – internet and cloud based applications – the common interface to the internet

SOFTWARE/APPLICATION DEVELOPMENT (FISD Syllabus 3.1.4) FISD syllabus requires you to understand: • What is software/firmware • Programming languages (C, C#, .NET, Java) • Scripting (Perl) • API • FPGA and hardware acceleration


Software/application development: • Software – code instructions

• Firmware – hardware with “software embedded”

• Programming languages – C, C# - programmer language – .NET – Microsoft application developer’s software – Java – Sun (Oracle) based developer’s software – Scripting (Perl) – unix based programmer language

• API – application programming interface, generally the handshake bringing external data into an internal application

• FPGAs - hardware accelerators – Field Programmable Gate Array, programmable chips for customisation – manage high tick rates, high volume data management


GENERAL COMPUTING TERMINOLOGY (FISD Syllabus 3.1.5)

FISD syllabus requires you to: Have a broad understanding of: • The internet (the world wide web) • Web 2.0 • Distributed computing/systems • Grid computing • Cloud computing

FINANCE MODULES COURSE NOTES: General Computing Terminology: • The internet – Global system of interconnected computer networks that use the standard TCP/IP (internet protocol suite) to serve billion of users worldwide. – TCP/IP is made up of the TCP (Transmission Control Protocol) and IP (Internet Protocol) protocols • Web 2.0 – Web 2.0 is considered the “web as a platform” – it’s the combination of technology that allows people to interact with information on the world wide web. Examples of such applications are: Gmail, Flickr, Google maps etc. • Client/server and distributed computing – Client/server computing is where specific computers provide one or more service to other computers within a network – Distributed computing is where a single computer programme runs in more than one computer at the same time (similar to grid computing) • Grid computing – Grid computing is sharing tasks over multiple computers. Tasks can range from data storage to complex calculations and can be spread over large geographical distances. These computers join together to create a virtual supercomputer. Even though they can work together on the same problem, they are independently controlled and can perform tasks unrelated to the grid. They can also have different operating systems or hardware. • Cloud computing – Cloud computing is using computer resources that are delivered as a service over a network (typically the internet) – Benefits of cloud computing include the ability to: – Scale systems up or down on demand – Access data from anywhere via an internet connect – Replace occasional high expenditure on IT


Finance Modules video: The Technology – Module 2

Connectivity Time: 2 min 19 sec

CONNECTIVITY (FISD Syllabus 3.1.6) FISD syllabus requires you to: Understand the following terms • Networks • TCP/IP • Point to point, multicast, broadcast • Transmission medium (copper, fibre optics, satellite) • Network/comms hardware (hubs, switches, routers, modems, firewalls) • Telco providers • Leased lines, VPN, internet, extranet • Middleware • Bandwidth, throughput • Hosting, data centre, co-location, managed service, proximity

FINANCE MODULES COURSE NOTES: Connectivity: Networks • LAN (local area network) – connectivity between computer systems generally confined to a small, limited area such as a building • WAN (wide area network) – connectivity either direct (private) or using public carriers to include geographically remote locations in a single, shared network • MAN (metro area network) – similar to a WAN but limited to a small region such as a company’s sites across a city • V-LAN (virtual area network) – a broadcast domain set up with switches • Subnets are logical groupings of connected network devices The Internet Protocol (TCP/IP) • The internet uses the standard TCP/IP (Internet protocol suite) to serve billion of users worldwide – TCP/IP is made up of the TCP (Transmission Control Protocol) and IP (Internet Protocol) protocols – TCP was developed for the internet to get data from one network device to another – An IP address is the numerical label assigned to each device (computer, printer etc.) participating in a computer network that uses the internet protocol for communication


Transmission/data delivery formats: • Point to point – connectivity direct between two end points, such as a server distributing a broadcast to another server • Multicast is the delivery of a message or information to a group of destination computers simultaneously in a single transmission from the source. There could be one or more senders and there may be zero or many receivers • Broadcast is used to describe a method of communication in which a piece of information is sent from one point to all other points. There is one sender but the information is sent to all connected receivers • Unicast is the sending of a message to a single network destination identified by a unique address. There is one sender and one receiver • Leased lines, VPN, internet, extranet – forms of connectivity technologies • Co-location and proximity hosting for low latency applications – connectivity “at the location” generally taking advantage of connectivity constrained only by speed of light to the host machine • A data centre is a facility used to house computer systems and associated components, such as telecommunications and storage systems • A managed services provider (MSP) is typically an IT services provider that manages and assumes responsibility for providing a defined set of services to their clients. Transmission medium or physical delivery media is usually via: • Copper – traditional telephone line connectivity • Fibre optic – technology transmitting data using light pulsing which provides for significant capacity and speed improvement in data delivery • Satellite – use of satellite technology to eliminate the need for wired connectivity Mechanics of data delivery (network and hardware) • Hubs – join multiple computers (or network devices) together to form a single network segment allowing computers to communicate directly with each other • Switches – a hardware device that connect multiple computers (a more modern form of a hub) • Routers – routers connect multiple networks (e.g. LANs) to the internet • Modems – a networking device that converts analogue and digital data for computer-to-computer communications • Firewalls – hardware or software that acts as a barrier between the computer and the network. It’s role is to protect and prevent “intruders” (viruses and hackers) from destroying, tampering or gaining access to your files


Capacity & Systems • Middleware – the software that connects different parts of an application or a series of applications. It can be a single application or it can be an entire server • Bandwidth – the term used to describe how much information can be transmitted over a connection. It is usually measured in bits per second (bps) • Throughput can be considered a subset of bandwidth and takes into account whether data was successfully transmitted or not Telco Providers A telco is a telephone service provider or a telecommunications operator. They are considered a type of communications service provider (CSP) that provides telecommunications services that provide telephony and data communications access which now also includes wireless or mobile network operators. Many telephone companies were at one time government agencies or privately owned but state-regulated monopolies. Most telcos now also function as internet service providers (ISPs), and the distinction between a telco and an ISP may disappear completely over time, as the current trend for supplier convergence in the industry continues. Most telcos now also function as internet service providers (ISPs), and the distinction between a telco and an ISP may disappear completely over time as the current trend for supplier convergence in the industry continues. Examples of telco providers include: NTT, Verizon Communications, AT&T Inc, Deutsche Telekom, Telefonica, France Telecom, Vodafone Group, Telecom Italia, China Mobile (HK) Ltd, BellSouth Corp, BT Group



Stability & Datafeeds Time: 5 min 51 sec

STABILITY (FISD Syllabus 3.1.7) FISD syllabus requires you to: Understand the following: • Resilience and fail-over • Latency • Scalability • Message rates

FINANCE MODULES COURSE NOTES: Stability • Golden rule of stability & quality – “accuracy, completeness, timeliness and reliability” • Resilience and fail-over implies disaster recovery sites (DR) and delivery or processing on “dual threads” • Latency – delay in delivery from first available to receipts. The trend has been from seconds to milliseconds and speed of light • Scalability – ability to handle growth, ability to handle volume spikes • Message rates – “the tick” , primarily around exchange quote volumes, options dilemma

DATAFEEDS (FISD Syllabus 3.2) FISD syllabus requires you to: Understand what is meant by a datafeed, and: • How a datafeed is typically delivered to a client • What a “consolidated” datafeed is • What a “direct” datafeed is • How datafeeds are processed • What a broadcast (Full Cache) datafeed is • What a selective cache/interactive datafeed is And should have a general understanding of the following terminologies as they relate to data feeds: • Throttling, pulsed, intervalised • Snapped, streaming, delayed, real-time, EOD, conflated • Push/pull technologies • Pub/sub mechanisms • Logicised records, paginated data, ANSI page based • Protocols (FIX, FAST, ITCH, XML) A candidate should have an appreciation of the strengths and weaknesses of various types of data feed offerings and the effort required to implement new feeds or to migrate between existing feeds. You should also have a broad understanding of when and why datafeeds might be implemented. A candidate should have a robust understanding of the datafeed offerings in the market: • Aggregated/consolidated • Direct • Hybrid or co-located or hosted solutions


FINANCE MODULES COURSE NOTES: Datafeeds Datafeeds are generally delivered via a 3rd party vendor (consolidator) feed (e.g. Thomson Reuters RDF or Bloomberg B-Pipe) • A “consolidated” datafeed is where a vendor links to multiple sources (exchanges) and co-mingles the data into a single, uniform feed • A “direct” datafeed is from a single source (e.g. one exchange) which may reduce latency and improve access speeds • Datafeeds are processed by elaborate architecture of feed handlers and processing to manage data • A “broadcast” (full cache) datafeed is a feed that sends “all content” and the consumer chooses what they want to use - they may take and use all the data or may take and use just parts • A selective cache/interactive datafeed can sometimes be called a watchlist. The client chooses which data elements it wants to receive Key Terms • Throttling, pulsed, intervalised – control of data transfers by limited quantity or timing • Snap, streaming, delayed, real-time, EOD, conflated – types of quote/exchange data • Push/pull – delivery via publisher (push) or delivery by user request (pull) • Pub/sub (publish/subscribe) - data transfer from disseminator to receiver • Logicised records, paginated data, ANSI page based – forms of data element structures Protocols • FIX – Financial Information Exchange (primarily trading) • FAST – FIX adapted for STreaming • ITCH – data transfer status messaging • RV – TIBCO middleware messaging product “Rendezvous” • RRCP – Reuters Reliable Control Protocol • SASS2 – messaging format protocol • XML – eXtensible Markup Language messaging protocol • SOAP – Simple Object Access Protocol • HTTP – HyperText Transfer Protocol Datafeed offerings • Aggregated/consolidated – where multiple feeds (e.g. multiple exchanges) are managed and comingled into a single datafeed which provides the consuming application with a logical feed of all data across multiple markets • Direct – the consuming firm chooses to establish a direct electronic link to the market data feed from an exchange to reduce latency • Hybrid or co-located or hosted solutions – much the same as direct, but leveraging geographic location (at the same site) to further reduce delay or latency – Hybrid hosting - combining dedicated servers and cloud servers – Co-located - actually in the same location as the trading venue (exchange) – Proximity hosting - the phrases “proximity hosting” and “co-location” are often used interchangeably in common usage. However, “proximity hosting” originally meant in close proximity to the trading venue rather than actually in the same location



Distribution & Platform Time: 3 min 38 sec

DATA DISTRIBUTION – SYSTEMS AND SOFTWARE (FISD Syllabus 3.3)

FISD syllabus requires you to: Understand how data is distributed both between the provider and the client site but also within and around the client site. You should understand the basics of market data distribution systems, and: • What a market data distribution system (MDDS) is • Who the providers of MDDS are • What application permissioning and user entitlements are • What the core components of MDDS systems (feed handler, cache, distributor, wan gateway) are • Who the different types of market data consumers are and the respective “quality of service” required, e.g. desktop display apps, algo applications, tick capture engines FINANCE MODULES COURSE NOTES: Data Distribution:

Data is distributed between provider and client typically as a “broadcast” feed. Data is distributed around client site using middleware datafeeds and data management. Market data distribution system (MDDS) Market data distribution systems (MDDS) transport large amounts of financial markets data over the network and are designed to respond to the fast changes on the markets by compressing and representing data using specially designed protocols to increase throughput and reduce latency. Core MDDS system components include: • Feed handlers – manage the linking of particular datafeeds and manage the data into a client environment • Cache or caching – data storage for efficient data management, particularly to re-use collected data • WAN gateway – wide area network data transaction management Examples of MDDS providers are RMDS (now TREP “Thomson Reuters Enterprise Platform”), Triarch, TIB, Wombat DataFabric, Activ Middleware, Tervela, IBM Infodyne, Exegy. Application permissioning and user entitlements are controlling tools to manage audit-proofing and cost exposure. Data consumers (desktop, apps, tick capture) – as the name suggests, these are applications that “consume” data, examples are: single user “real time quote data app”, internal risk management system, tick capture for analysis, execution monitoring, “replay” (KX, VhaYu).


DESKTOPS E.G.TERMINALS (FISD Syllabus 3.4) WORKSTATIONS (FISD Syllabus 3.4.1)

FISD syllabus requires you to: Understand the basics of desktop workstations • The role of Microsoft Windows, DDE and RTD • How market data applications connect and communicate with the server • The difference between fat and thin client technology You should have a basic understanding of the key workstation offerings in the market. You should have a basic understanding of mobile and handheld devices and how data can be distributed and displayed to such devices. FINANCE MODULES COURSE NOTES: Desktops • Desktop workstations and terminals – The display terminal for “intelligent” workstations (such as: Bloomberg, Thomson Reuters)) • Role of Excel and Windows – DDE (dynamic data exchange) is a piece of Microsoft software that allows automated data linkages. The primary function of DDE is to allow Windows applications to share data. For example, a cell in Microsoft Excel could be linked to a value in another application and when the value changed, it would be automatically updated in the Excel spreadsheet – RTD (real time data) is updated and accessed immediately using Microsoft Excel’s DDE function. (Real time data means that data is delivered immediately as it’s collected – there is no delay in receiving the data) • Thick (Fat) vs. Thin – Fat technology is where the software is held locally – Thin technology is where the software is held remotely or in the cloud. It saves space on your own servers. • Mobile distribution – E.g. iPhone apps, wireless alerts, wireless as workstation • Market data application connect and communicate with the server using network and hardware – Hubs – join multiple computers (or network devices) together to form a single network segment allowing computers to communicate directly with each other – Switches – hardware devices that connect multiple computers (a more modern form of a hub) – Routers – routers connect multiple networks (e.g. LANs) to the internet – Modems – a networking device that converts analogue and digital data for computer-to-computer communications – Firewalls – hardware or software that acts as a barrier between the computer and the network. The role of the firewall is to protect and prevent “intruders” (viruses and hackers) from destroying, tampering or gaining access to your files


INSTANT MESSAGING (FISD Syllabus 3.4.2) FISD syllabus requires you to: Understand that instant messaging (IM) has become part of the product offering of many market data vendors. You should understand the broad concepts of IM and the key providers to the financial community with a specific focus on how this has been associated with market data solutions. Also you should be familiar with the compliance obligations for storage and retrieval of IM transcripts.

FINANCE MODULES COURSE NOTES: Instant Messaging Instant messaging (IM) is a type of online chat (text based) which offers real-time communication between two or more participants over the internet or other types of networks. There are however a number of risks associated with instant messaging, such as: security risks (e.g. spyware, viruses, trojans, worms), trade secret leakage and inappropriate risk as well as a compliance risk. There is a significant regulatory and compliance issue of “retaining sources of information” that range from client communications to demonstrating due diligence in making investment decisions. Sources and documentation of information must be preserved and retained for various timeframes (e.g. 3 years for securities research). If the source is an instant message, it would also be subject to storage and retain regulations and must be preserved. Some examples of key providers of instant messaging solutions to the financial community are Reuters Messaging and Bloomberg Messaging.


Finance Modules video: The Technology – Module 5 Transaction & Development

Time: 2 min 13 sec

TRANSACTION PRODUCTS – DESKTOP (FISD Syllabus 3.4.3) FISD syllabus requires you to: • Understand that, in addition to providing core market data, many market data vendors have expanded into the transaction product space and support and ownership of these products is often the market data groups’ responsibility. • Have a broad understanding of this area and the products that are provided. • Understand what the phrase “view and do” means.

FINANCE MODULES COURSE NOTES: Transaction Products In addition to providing core market data, many market data vendors have expanded into the transaction product space and the support and ownership of these products is often the market data groups’ responsibility. Transaction Products are essentially a trading workstation bringing multiple parties together e.g. Dealing3000, Fidessa, Ion, EBS, Bloomberg Trading etc. (and the overlap with core market data). They provide the ability to execute trades with a counterparty directly over a trading tool. “View and do” is the ability to see an indication of interest and to act with a trade. This is common to FX.



Implementation Time: 1 min 39 sec

DEVELOPMENT, IMPLEMENTATION, MANAGEMENT AND SUPPORT (FISD Syllabus 3.6) FISD syllabus requires you to: Have a broad understanding of how applications and systems are developed, deployed and subsequently maintained.

SYSTEM DEVELOPMENT (FISD Syllabus 3.6.1) FISD syllabus requires you to understand: • Programming languages and terminology (code, run-time, API, UAT, version control etc.) • Development environments (Dev, QA, Production) • Handling data (data integrity, support of entitlements and usage tracking, implications of derived data and redistribution) • The importance of test environments

FINANCE MODULES COURSE NOTES: Software & Systems Development Before you start any software and systems development, you should understand the dynamics and processes for software and systems development. Such as: • What requirements are needed by the business • What are the systems architecture development requirements • What are the related policies and procedures for new or modified systems and software into a production environment • Understanding the use and licensing agreements of data is a critical component when linking development and technology initiatives for market data. Things to consider include: – Entitlements – the concept to enable or prevent user or application access to a particular set or source of data – Controls and permissioning – the software systems that manage the access rights (or restrictions to access) – Audit trail building and reporting capabilities as needed in the development process – the licensing compliance function to accurately capture and report compliance with licensing terms for usage and the ability to provide audit capability to demonstrate how licensing compliance is managed Key terminology • API (application programming interface) is a protocol intended to be used as an interface by software components to communicate with eachother. • ABI (application binary interface) is a low-level interface between a computer programme and the operating system or another programme. • UAT (user acceptance testing) is a test conducted to determine if the requirements of a specification are met • Run-time is the time during which a programme is running (executing) • Code is a rule for converting a piece of information • Version control lets you track your files over time


Programming languages A programming language is a way to communicate instructions to a computer. There are however many different programming languages and it is usually split into two components of syntax (the set of rules that defines the combination of symbols) and semantics (meaning). Some examples of programming languages include C++, Visual Basic, PEARL, PHP, Java and JavaScript. Note that markup languages such as XML or THML define structured data and are not usually considered programming languages. Development environments Development environments is the concept that all change and development work should be conducted in an environment outside of the production environment to ensure that the changes and modifications to systems cannot impact production. (see more under implementation in the next section below) • Managing change – tracking errors, validating code and process – This is the process of recording and manage change in the data to isolate errors and issues and identify root cause when a problem occurs. • Test environments – Test environments are used to avoid impact to critical functions and processes. They are designed to mimic production environments, but allow the development team to make changes without any impact on a production system.

3.6.2 IMPLEMENTATION (FISD Syllabus 3.6.2)

FISD syllabus requires you to understand: • How systems are tested and deployed • What techniques are used to package software for mass deployment • Software compatibility issues and resolution • Importance of change management processes • The role of ‘project management’ • The importance of being able to “fall back” to an earlier version • The importance of backward compatibility


Implementation General “good hygiene” practices for software implementation include a number of processes and terminology that you should be aware of. These include: • Development and quality assurance / regression testing / testing process and procedures • Bundled software builds or centrally managed desktop control/deployment / upgrades / version releases • Change management is important because it provides control and issue identification • Project management role is to co-ordinate inter-discipline team ie: requirements, Dev, QA (quality assurance), production • Roll back, also known as “fall-back”, is important because if an error occurs you have the ability to can recover to a prior version • Backward compatibility is the design for previous version to continue to work on devices e.g. Microsoft 2003 and Microsoft 2007



Support Time: 2 min 17 sec

SUPPORT (FISD Syllabus 3.6.3) FISD syllabus requires you to: Understand the following: • Importance of incident and problem management within market data • Need for capacity management as it relates to market data • Understand client (i.e. end users) base and impact of systems failure (availability management) • Impact of systems recovery to end users and applications • Business continuity management and disaster recovery planning • System monitoring and alerting , including latency

FINANCE MODULES COURSE NOTES: Incident and Problem Management Service Level Agreement (SLA) management – general practice for support standards, incident monitoring and reporting. It provides: • Actionable steps to identify and remedy issues from re-occurring • Framework and guidelines on managing a timely response to, and resolution of, problems Capacity management and planning is the monitoring of available scale and overhead for peak rates and it is becoming increasingly important with exponential growth rates in tick volumes. Capacity management monitors: • Number of securities, number of markets and venues • Compliance with Reg NMS, MiFid, decimalisation and alternative trading platforms Criticality is the understanding of user group needs for availability and accuracy. For example a trading floor must be up 100% of the time or the firm cannot trade and the impact is high, whereas a back office accounting function can be delayed potentially for several hours without causing a critical impact. System monitoring – tools to assess system status and identify problems, also to capture errors. Business continuity/disaster recovery increased after 9/11 with regulators stating that you must have business continuity/disaster recovery plans in place and that they should enable you to continue work in a geographically remote location.



Application & Technology Types Time: 1 min 56 sec

APPLICATIONS AND ASSOCIATED TECHNOLOGY (FISD Syllabus 3.5) APPLICATION TYPES (FISD Syllabus 3.5.1)

FISD syllabus requires you to: Understand how and why applications are deployed and how they either add value to market and reference data, or how they consume it as part of a wider functionality. • Charting and technical analysis • Various mathematical functions • Algorithmic trading • Risk management • Trading systems – OMS & EMS – Smart order routing – Pricing systems

FINANCE MODULES COURSE NOTES: Applications & Technology Functions & Types: • Charting and technical analysis –historical trend analysis often called the “psychology in the markets”. • Risk management – tools supporting ingestion of exposures, issue/obligor concentration, margin calls. • Algorithmic trading (algo trading) – algorithms (mathematical functions) automate trades using electronic platforms whereby the algorithm executes a pre-programmed trading instructions based on a set of rules (the trade is executed without human intervention.) • Trading systems – applications for the observation and execution of counterparty offers. – OMS & EMS – trading systems “Order Management System” and “Execution Management Systems” (vendors include ITG, Charles River) – Smart order routing – supports RegNMS and MiFid in locating best price across venues – Pricing engines – applications to produce securities values in support of a trading function

ALGORITHMIC TRADING (FISD Syllabus 3.5.2) FISD syllabus requires you to: Specifically for algorithmic trading, you should understand the market data technologies currently in play, who the vendors are, what are their key challenges, including their recent history and reason for being. You should also understand in broad terms: • Low latency feed and distribution systems • Messaging systems • Complex event processing and its relevance • The reasons for tick capture systems • The reasons for latency metrics and the existing technologies being marketed • The benefits and challenges of co-location and proximity hosting


FINANCE MODULES COURSE NOTES: Algorithmic Trading: Algorithmic trading is the use of mathematical models (or mathematical rules) to generate high speed automated trading. • Originally known as “programme trading” • Primarily arbitrage between dissimilar markets (spot vs futures) or dissimilar price across trading venues (e.g. price of IBM trading in London vs. NY) • Latency is key to mispricing and opportunities to “get in first” before the mispricing is corrected • Has led to the co-location and fight to beat speed of light issues • Offshoot is high frequency trading (HFT) which has taken the markets from “investing” to “trading” • Algorithms are blamed for the Flash Crash of May 6, 2010 which saw the Dow index drop 998 points (9%) based on automated trading rules • There is an issue of distance from the exchange’s Order Matching Engine (OME) – the system that crosses trades whenever a bid and offer match – and whether or not an algo can be placed on the OME machine

PRICE CONTRIBUTIONS (FISD Syllabus 3.5.3)

FISD syllabus requires you to: Understand the concept of price contributions, methods and core components and understand that a contributor may provide an offering of its inventory and available pricing in a range of methodologies that include: • Spreadsheet publishing • Multi-vendor contribution systems • Vendor contribution protocols FINANCE MODULES COURSE NOTES: Pricing contributions • Spreadsheet publishing – using a spreadsheet like Excel as a mechanism to output a feed of data • Multi-vendor contribution systems – systems that enable a single item to be updated and that update duplicated and sent to multiple recipient data vendors. • Vendor contribution protocols – protocols like Marketlink from Thomson Reuters



File Types Time: 2 min

TYPES OF INFORMATION FILES (FISD Syllabus 3.7.2)

FISD syllabus requires you to: Understand differences between types of information files – reference data, pricing, corporate actions supplied and the range and types of instruments that can be accessed. FINANCE MODULES COURSE NOTES: Types of information files: Reference data – primarily a batch data file, delivered overnight • New adds and changes to asset descriptive data • Coupled with lookup tools for interday support of end user to look up new securities or research data anomalies Pricing data – real time (as discussed above), end of day pricing files • Similar to reference data files but “everything changes” because there is a new price value for each security. With reference data there is a onetime setup and then only infrequent changes • Pricing data may update interday or as markets close. • Special requirements for mutual fund net asset value (NAV) price generation has a 6pm deadline to publish requires pricing conducted “at market close”…fire-drill to generate the NAV from 4pm to 6pm Corporate actions – daily events (splits, dividends, spinoffs, reorganisation) • Infrequent per security (approx. 4 dividend records per year). • Lots of different data elements can be used to describe one action (e.g. dividend – record date, pay date, ex-dividend date, rate, tax)


ENTERPRISE AND REFERENCE DATA MANAGEMENT (FISD Syllabus 3.7) FISD syllabus requires you to understand: • How data is distributed both between the provider and the client site but also within and around the client site. • The importance of “Enterprise Data Management” (EDM) and hence the technologies required to support it. • The interdependence between reference data and price data. • The data providers and solution providers servicing this market segment.

FINANCE MODULES COURSE NOTES: Enterprise Reference Data: EDM is a sub component of the growth in reference data management. Relatively new, circa 2002, when it was established as an objective for data management. • Issue 1 – Firms had disparate data in separate databases and files in multiple departments and systems heading to significant data inconsistencies – identified the issue that data is not clean or well managed • Issue 2 – Firms spent significant resources cross referencing securities to various systems, a cost borne by almost all participant firms in the industry… essentially paying over and over again to know what the instrument is. • Issue 3 – Securities trading in various markets could trade with different characteristics (e.g. Lloyds in GBP on the LSE and in EUR on the Deutsche Börse) The goal of EDM is to reduce operational cost and increase data consistency with a single, enterprise wide “gold copy” of improved data for all downstream use.

BASICS OF BACK OFFICE DATA DISTRIBUTION SYSTEMS (FISD Syllabus 3.7.1) FISD syllabus requires you to: Understand the basics of back office data distribution systems. You should know: • What a reference data distribution system is • How files are transferred via FTP, Push/Pull, Secure FTP, automated FTP extraction delivery


Reference data systems Very broadly reference data systems (sometime called enterprise data management systems) have been deployed with the objective of collating multiple data sets (databases) that a client may be operating into a singular more holistic record. for example creating a ‘securities master file’ or a ‘golden copy’. the key problem these systems are trying to solve is that many client organizations maintain records of data about the same instrument or counter party in different places within their organisation - and often the data is different. The initial task is to cleanse and merge/coordinate these different databases and then to operate a process that maintains the integrity of a single unified view. How are files transferred Reference data systems (enterprise data management systems) are different to the real time market data systems and are based on the occasional (probably daily) transfer of bulk files between different parts of the organization. Transfer of such files may often be done using something like FTP (File Transfer Protocol).


Vendor Type Category Product Name Original (acquired company)

SunGard Technology Investment Research App Sungard-Monis Monis Software

SunGard Technology OMS/Trading Execution Fixnetix Fixnetix

SunGard Technology Data Management Software SunGard Financial Information

FAME Information Services

SunGard Technology Data Management Software SunGard Global Network

SunGard Global Network

Eagle Systems Technology Data Management Software Eagle Systems SunGard Transaction Network

Oracle Technology Data Management Software Oracle

Sybase Technology Data Management Software Sybase

Streambase Technology Complex Event Processing App Streambase

HP Technology Computer Hardware Provider HP

IBM Technology Computer Hardware Provider IBM

Intel Technology Computer Hardware Provider Intel

Microsoft Technology Computer Hardware Provider Microsoft

Activ Financial Technology Low Latency Provider Activ Financial

Equinix Technology Low Latency Provider Equinix

Exegy Technology Low Latency Provider Exegy

Novasparks Technology Low Latency Provider Novasparks

Solace Systems Technology Low Latency Provider Solace Systems

TIBCO Technology Middleware Data Distribution TIBCO

CISCO Technology Networking Systems CISCO

IPC Technology Networking Systems IPC

Arcontech Technology OMS Contributed Data Arcontech

AIM Software Technology Reference Data Management Software

AIM Software

Asset Control Technology Reference Data Management Software

Asset Control

CADIS Technology Reference Data Management Software

CADIS

Goldensource Technology Reference Data Management Software

Goldensource

BT Global Technology Telecommunications BT Global

Savvis Technology Telecommunications Savvis

KX Technology Tick data management KX

Citrix Systems Technology

Fixnetix Technology


You have now reached the end of the Technology Section.

Feel free to watch the videos again, study the notes and research some of the terminology if you need to.

You can also work through the quiz as a “mock exam” to test your knowledge as many times as you like.

The other sections that the FISD FIA Syllabus covers are: • The Markets

• The Data • Industry Issues & Trends

To book the FISD FIA exam visit: http://siia.net/fisdpc/test.asp

Good luck!

Disclaimer: We promise to use all reasonable skill, effort and experience to produce content of the highest quality and accuracy. There may be occasions when interpretation of details, changes of time or other circumstance has led to inaccuracy. If this is ever the case, we apologise. If you are a purchaser (from Learning Modules) we limit our responsibility to you to the price you paid for your purchase. If you are not a purchaser (from Learning Modules) we accept no financial responsibility to you arising from your use of Finance Modules and its content.

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