Rosenthal Collins Group, LLC (RCG), a leading independent futures clearing firm, announced today that it has developed and filed for patent protection on a first-of-its-kind futures brokerage risk management system.
Based on Complex Event Processing (CEP) technology and scheduled to launch in the first quarter, RCG RiskHuntersm is designed to "hunt" out and highlight any trading pattern or behavior that deviates from a client's or trader's historical behavior. The advanced technology will enable RCG to highlight prospective risk issues in real time across exchanges, products and the 24-hour trading day to allow for rapid response and amelioration if needed.
Connamara Systems worked with the RCG technology team to develop and implement RCG's idea, bringing in California-based Coral8 to supply the CEP technology. CEP has been used in the military and other industries and is a popular technology behind algorithmic trading.
RCG RiskHunter augments the existing pre-trade and post-trade risk management processes long in place at the firm. By operating in near real time around the clock, the system closes the time gap that firms usually face between a transaction and the regular monitoring of profit and loss within and across accounts. If RCG encountered a situation in which the pre-trade process did not prevent a behavior that could put a client or the firm at risk, within minutes of an electronic trade, the firm could understand the impact and take corrective measures.
"RCG RiskHunter is an indispensable technological tool that goes beyond our already robust pre- and post-trade risk management processes to protect our clients, trading personnel and the firm," said Scott Gordon, RCG Chairman and Chief Executive Officer. "Throughout the past year, we've seen unprecedented volatility across the financial and commodity markets to the point where a market can take a remarkable turn against a client in very short order. RiskHunter gives our premier risk management personnel an extraordinary new vehicle for mitigating risk by finding potential issues before they can have a significant impact on individuals or the firm."
RiskHunter interfaces with RCG's back-office system to accumulate information and "hunt" for key indicators to verify that every client trade is within defined parameters. The system is built on a CEP engine that incorporates complex algorithms, client trading information, live market data and RCG parameters to identify trading behaviors and patterns, regardless of how a trade is placed or in which market. RCG RiskHunter provides virtually instantaneous warning if a trader or organization may potentially present a risk issue. The CEP technology, licensed by Coral8, encapsulates proprietary algorithms developed by RCG that identify accounts and associated activity, correlating streams of real-time data. Multiple alert levels trigger appropriate action by RCG.
"This has been a truly exciting project as I believe RCG RiskHunter will be a gamechanger for risk management in the futures industry," said Jim Downs, founder and Chief Executive Officer of Connamara Systems. "It completes the pre-trade and post-trade loop for risk management, enabling RCG to have a much faster view of potential issues than others in the industry and to view risk in ways that have never been accomplished before."
As soon as RCG approached Connamara about the project last year, Downs and his team identified the necessary technology, brought in Coral8 and led the design and implementation, which included a comprehensive integration of multiple systems within the firm. RCG began developing the complex algorithms, and within weeks, the team was able to test the system with a proof of concept, applying the CEP technology real time to high-speed, high-volume data within the firm and confirming that the project would be successful.
"In times of market turbulence, it is leaders like Rosenthal Collins Group who use the combination of superior technology, industry excellence and best practices to come to the forefront," said Terry Cunningham, CEO of Coral8, Inc. "We are pleased to see RCG maintain its market leadership with Coral8 Engine, the most recognized CEP platform by financial market firms for rapid, agile development and deployment of sophisticated algorithms."
"We're finding that the RCG RiskHunter technology - powered by the Coral8 CEP engine - is so flexible and customizable that we can continuously modify the scope of the system to add new risk factors and algorithms that enhance what RiskHunter can do," Gordon said.