Smart trading technicians will test their systems completely before using them in any sort of live production environment. Of course, building a trading platform that excels in the market will require a lot of uptime and a likelihood of failure that is as near to zero as possible. For years, techs used a variety of tools to test the different components of their platforms across every aspect of the order workflow.
However, many modern testing tools for infrastructure essentially point to solutions that are focusing on a particular part of the picture overall. In today’s competitive and complicated trading environment, this approach is simply not the most efficient way to manage an entire landscape. The idea of a trading system as just a single management layer is no longer relevant as you have multiple testing solutions and trading systems operating in the same space, creating an incredible amount of complexity.
The “ad hoc” testing approach
Firms need to be able operate and control a highly disparate platform. They must be able to test and manage on an enterprise scale, produce validation of test results that can be audited, and embrace a wide set of testing agents and tools at the same time. Not surprisingly, this is far easier said than done.
Over time, trading operations have evolved into complex networks with various applications using different technologies combined into one trading infrastructure. Testing has evolved in a similar ad hoc way, and this has resulted in many firms lacking the wide-view perspective or a thorough testing strategy, relying instead on an array of different testing agents and resulting in questions about the system’s reliability.
Change is long overdue
The fragmented approach that many firms use today is inefficient, expensive and onerous, and it could also be dangerous in the new regulatory climate that has been emerging. While innovations such as post trade FIX have made regulatory compliance easier for many firms, it does not address other areas of MiFID II, which also requires that firms certify that their algorithms have been properly tested to ensure they do not contribute to or create disorderly conditions in trading before being used in a live market.
Errors can be very expensive, and a trading system failure can have a devastating impact on a firm’s reputation. It can also lead to personal repercussions for executives, systemic issues in wider financial markets, and increased scrutiny from regulators. Clearly, this is one area of the financial sector where a new advancement makes a big difference, just like post trade FIX did.
A standardized, enterprise-wide approach to your firm’s testing can improve the availability of consistent and reliable data for IT performance, which justifies the capital investment needed for it on its own. In addition, such a move can boost the quality of your trading operations, lower costs and help you to head off some of the new regulatory challenges that may be just around the corner.