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The funny thing about this comment is everyone whose read this but hasn't dealt with this problem is super confused that it even exists. Immediately after read

by kunle 6y ago

The funny thing about this comment is everyone whose read this but hasn't dealt with this problem is super confused that it even exists. Immediately after reading this, a colleague asked: "How can a balance ever be not the sum of the transactions ?" Which elides the fact that differing transactions have different states they can be in (and different levels of immutability). But once you get in the weeds dealing with this stuff is a real pain.

noizejoy 6y ago
You should have added a “trigger warning” to your submission - as a courtesy to those of us, who’ve experienced and then escaped that world. :-)
- doonesbury 6y ago
  Right ... the underlying issue here is that we have N entities each with their own IT systems. There is a serious and direct dependency between them in order to carry out daily trading as my custodial example shows. The way out is to have a realtime event feed between the two which requires a common serialization format, securityIds, accounts, etc. etc. Not even JPM or BNY has this so far as I know on the custodian side before we even entertain what trader X's company might have. Therefore what tends to happen is ETL's where some middle-system imports the trader's and custodian views and tries to reconcile. Note these views are often only available after batch processes run at the end of the day ... The problems are ... tons: - Even FIX/Swift etc. messages are prone to incomplete interpretation and mis-usage the latter hard to change once it's baked in. Setting up yet another format is a huge ask. - Each end of the work invariably has a slightly different data model so even if one did get the data it's not like there's a memcmp of two structs at the bottom somewhere - As I say blockchain w/ POW is not only slow, there are oodles of privacy concerns. And even if you tech'd that out blockchain would be a Merkle wrapper of something like a CSV/FIX/Omgeo/Swift message ... and what's the point then of all that crypto nonsense? Better to have a direct HTTPs connection, and skip the crypto work. However, if counter-parties could somehow get messages from the exchange at the time the trade is done and forwarded something to the trader and counter-party (granted encroaching on the some $100 billion/yr custodian business) that might help. Indeed, other writers here make a good point: trading through exchanges is nice. Post-trade sucks.
  - noizejoy 6y ago
    lol - everything you say is right and eloquently stated! My over-simplified version would just say “precise communication of even moderately complex facts is incredibly hard”. And that’s human to human communication, of which system to system communication is arguably just an implementation. Arguably even communicating with ourselves over stretches of time is non-trivial as experienced by anyone who has ever found a paper note or maybe a comment in code by one’s younger self only to scratch our head and wonder “wtf did I mean by that?”
    - kunle 6y ago
      yep
  - toomuchtodo 6y ago
    In your opinion, where is the most room for improvement in post trade ops, including clearing and settlement? How do you disrupt those entrenched parties that aren’t too enthusiastic about system efficiency improvements?
  - oggy 6y ago
    Shameless plug: the problems that you describe are almost exactly what we're trying to solve with DAML and Canton [1]. From the Canton whitepaper: Building distributed applications that involve multiple organizations is hard with today’s technology. For each application, all organizations must agree on the data encoding, transport mechanisms, and interaction rules, and all must implement their part of the interaction correctly, including authentication and authorization. Once implemented, such an application often becomes a silo: there is no general convenient, secure and privacy-preserving way to integrate such applications and compose the business workflows that they automate. The big problem is bootstrapping the network; as you say, setting up yet another format (DAML in this case) is a huge ask. But we're starting to see the beginnings of a network, as in the next couple of years the Australian [2] and north-bound (i.e., mainland China) Hong Kong securities [3] will be accessible through DAML. [1]: https://canton.io https://canton.io [2]: https://www2.asx.com.au/markets/clearing-and-settlement-services/chess-replacement/about-chess-replacement https://www2.asx.com.au/markets/clearing-and-settlement-serv... [3]: https://www.ledgerinsights.com/hkex-daml-smart-contract-stock-settlement-platform-in-2022/ https://www.ledgerinsights.com/hkex-daml-smart-contract-stoc...
- kunle 6y ago
  Yeah, definitely some PTSD

by kunle 6y ago

noizejoy 6y ago

You should have added a “trigger warning” to your submission - as a courtesy to those of us, who’ve experienced and then escaped that world. :-)

doonesbury 6y ago
Right ... the underlying issue here is that we have N entities each with their own IT systems. There is a serious and direct dependency between them in order to carry out daily trading as my custodial example shows. The way out is to have a realtime event feed between the two which requires a common serialization format, securityIds, accounts, etc. etc. Not even JPM or BNY has this so far as I know on the custodian side before we even entertain what trader X's company might have. Therefore what tends to happen is ETL's where some middle-system imports the trader's and custodian views and tries to reconcile. Note these views are often only available after batch processes run at the end of the day ... The problems are ... tons: - Even FIX/Swift etc. messages are prone to incomplete interpretation and mis-usage the latter hard to change once it's baked in. Setting up yet another format is a huge ask. - Each end of the work invariably has a slightly different data model so even if one did get the data it's not like there's a memcmp of two structs at the bottom somewhere - As I say blockchain w/ POW is not only slow, there are oodles of privacy concerns. And even if you tech'd that out blockchain would be a Merkle wrapper of something like a CSV/FIX/Omgeo/Swift message ... and what's the point then of all that crypto nonsense? Better to have a direct HTTPs connection, and skip the crypto work. However, if counter-parties could somehow get messages from the exchange at the time the trade is done and forwarded something to the trader and counter-party (granted encroaching on the some $100 billion/yr custodian business) that might help. Indeed, other writers here make a good point: trading through exchanges is nice. Post-trade sucks.
- noizejoy 6y ago
  lol - everything you say is right and eloquently stated! My over-simplified version would just say “precise communication of even moderately complex facts is incredibly hard”. And that’s human to human communication, of which system to system communication is arguably just an implementation. Arguably even communicating with ourselves over stretches of time is non-trivial as experienced by anyone who has ever found a paper note or maybe a comment in code by one’s younger self only to scratch our head and wonder “wtf did I mean by that?”
  - kunle 6y ago
    yep
- toomuchtodo 6y ago
  In your opinion, where is the most room for improvement in post trade ops, including clearing and settlement? How do you disrupt those entrenched parties that aren’t too enthusiastic about system efficiency improvements?
- oggy 6y ago
  Shameless plug: the problems that you describe are almost exactly what we're trying to solve with DAML and Canton [1]. From the Canton whitepaper: Building distributed applications that involve multiple organizations is hard with today’s technology. For each application, all organizations must agree on the data encoding, transport mechanisms, and interaction rules, and all must implement their part of the interaction correctly, including authentication and authorization. Once implemented, such an application often becomes a silo: there is no general convenient, secure and privacy-preserving way to integrate such applications and compose the business workflows that they automate. The big problem is bootstrapping the network; as you say, setting up yet another format (DAML in this case) is a huge ask. But we're starting to see the beginnings of a network, as in the next couple of years the Australian [2] and north-bound (i.e., mainland China) Hong Kong securities [3] will be accessible through DAML. [1]: https://canton.io https://canton.io [2]: https://www2.asx.com.au/markets/clearing-and-settlement-services/chess-replacement/about-chess-replacement https://www2.asx.com.au/markets/clearing-and-settlement-serv... [3]: https://www.ledgerinsights.com/hkex-daml-smart-contract-stock-settlement-platform-in-2022/ https://www.ledgerinsights.com/hkex-daml-smart-contract-stoc...
kunle 6y ago
Yeah, definitely some PTSD