Web Summit 2013: Open Source Liar's Poker by Kirk Wylie
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A talk by OpenGamma's chairman and co-founder, Kirk Wylie, on open source in the capital markets. Web Summit 2013, Dublin.
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Web Summit 2013: Open Source Liar's Poker by Kirk Wylie
- 1. Web Summit 2013 | Dublin Open Source Liar’s Poker Getting hedge funds and investment banks to collaborate using Open Source Kirk Wylie Chairman & Co-Founder, OpenGamma @kirkwy
- 2. Who Am I • OpenGamma 2009 • Finance 2004 • Silicon Valley 1998 @kirkwy
- 5. Open Source software Contradiction? Capital markets @kirkwy
- 7. Capital Markets? • • • • • Hedge Funds Investment Banks Market Infrastructure Insurance …everything that blew up in 2008 @kirkwy
- 8. What’s this talk doing on the Developers’ stage? @kirkwy
- 9. Morgan Stanley IT & Ops Morgan Stanley Sales & Trading @kirkwy
- 10. What goes on in there? @kirkwy
- 11. Basic IT Support Open source all over: • • • • Linux Apache/Nginx PostgreSQL/MySQL Puppet/Chef @kirkwy
- 12. Back Office No Open Source @kirkwy
- 13. “Alpha Generation” • Algorithmic trading • Human opinions • 80/20 rule @kirkwy
- 14. Trading Support • • • • Custom applications Excel Risk Regulations • Open Source • • • • Java Spring NoSQL OpenGamma @kirkwy
- 15. They can’t collaborate (directly). • Compliance • Fear of alphageneration leakage • The CFO @kirkwy
- 16. How do they engage? • Vendor shield • Closed-door industry-wide committees • Consultants • Informally @kirkwy
- 17. Encouraging Collaboration • Have a vendor • Don’t chase tech fads • Communicate informally @kirkwy
- 18. Useful Links • • • • • • A+ – http://www.aplusdev.org/ JQuantLib - http://jquantlib.org/ Marketcetera - http://marketcetera.org/ Quantlib - http://quantlib.org/index.shtml R - http://www.r-project.org/ Tradelink - https://code.google.com/p/tradelink/ @kirkwy
- 19. Further Reading • Bernstein, Peter L. Against the Gods: The Remarkable Story of Risk. New York: Wiley, 1996. • Das, Satyajit. Extreme Money: Masters of the Universe and the Cult of Risk. New York: Pearson Financial Times/Prentice Hall, 2011. • Harris, Robert. The Fear Index. London: Hutchinson, 2011. • Lewis, Michael M. Liar’s Poker: Rising Through the Wreckage on Wall Street. New York: Norton, 1989. • Lewis, Michael M. The Big Short: Inside the Doomsday Machine. New York: Norton, 2010. • Taleb, Nassim Nicholas. Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets. New York: Random House, 2001. @kirkwy
- 21. Thank you. Kirk Wylie Chairman & Co-Founder, OpenGamma @kirkwy www.opengamma.com @kirkwy
Notas del editor
- Abstract: When people think about software for Capital Markets trading, "secrecy" is usually a better word than "community". In fact, hedge funds, investment banks, derivatives traders, exchange operators and regulators are all keen consumers, proponents, and even producers of Open Source technology. In this talk Kirk will shed a light on what really goes on inside the world's largest banks and hedge funds, how they interact with the Open Source community, and how they manage to reconcile all that with their desire to constantly stay ahead of each other.
- Who am I?Silicon valleyFinanceOG
- Who is OG?Theme: open source software in capital marketsMay seem like contradiction, but in fact its not
- Fundamentally – this talk is not about how the derivatives market operates – this is a tech talk. Let me talk about actually what’s going on inside these banks from a tech perspective. Alternative imageshttp://www.flickr.com/photos/thomasleuthard/4143643625/ (suspicious old dude)http://www.flickr.com/photos/quernuscrafts/8450557240/ (grumpy cat)http://www.flickr.com/photos/awfulshot/117392895/ (angry geeks)http://www.flickr.com/photos/wiredfornoise/4110574024/ (baby with computer)
- Transitionary slide: Google Satellite image of the south west quadrant of Canary Wharf. Highlight 2 things: MS Sales & Trading, bigger MS IT & Ops.Easiest way to think about exactly how MS has divided up their commercial real estate in London. Given that they employ more people to look after the traders than they have traders, what are those guys doing all day?
- They do basic IT support. ZOOM(desktop crap)BlackberriesServersStorage + backup (tape robot) Open source use case 1: server support overlay with a few bullets on top of the 4 imagesLinuxApache/NginxPostgresql/MySQL
- Back Office (explain what it is – mechanics of making sure that the right payments get made to the right people at the right time and that the stocks go to the right people, bonds go to right people, everyone knows where the money actually is)Someone handing over and other handing over money. Picture of a mainframe.NO OPEN SOURCEREASON: the most boring part of financial technology by far. Accounting rules. Complying with regulation. Large SI firms and still depends on mainframes, if it aint broke, don't fix it. If you want to know why, ….
- “Alpha Generation”Algo tradingHuman opinions80/20 rule – top 20% of the stack may be alpha generationAt any given firm, everyone’s aware of what is proprietary to that firm. Allows the firm to make money against their peer group. Maybe better algorithms, smarter people (embedding their knowledge in software) – the only area that anyone in capital markets think they make money from. Everything else is nothing but a pure cost structure. Problem: this is the only part that many people think of in terms of a bank/hedge fund. They forget the fact that in order to support those few algorithms/people, they require this whole building of people doing nothing but building up tools and systems for them to use. These will never be shared , never be open – every single bank and hedge fund is afraid is if they release info, they will find themselves in a disadvantage or be no longer able to make money the same way that they did.Given that we already have examples of OS being used massively, and we know that the developers understand that only the alpha generation is actually making money, but biz people don't recognise that, …
- Commoditized TradingLots of custom appsLots of ExcelRiskRegulations (stack of print out-y stuff)open source land:JavaSpringNoSQLOpenGammaOS on the right - appear
- Why aren’t they just getting into a room and solving all the problems with open source? Seems like the way that would work.Bullets: Compliance (not allowed to talk on record with competitors) Fear of Alpha Gen Leakage(Project at a large iBank - constantly changing firewall rules - Even making stackoverflow a read only resource) The CFO(most banks cant have their devs submitting any form of open source code – often rules are in place that treat code as an asset on their balance sheet)
- How then do these firms engage with the open source community given that you didn't probably realise all of this is going on behind the scenes?Simple bullets that pop up as we go:Vendor shieldAlmost everyone of these firms is paying for a commercial subscription from one of the big server vendors. Red Hat/Canonical. Because they like the model, where they are able to have a confidential communication with a comms sponsor, who they know is also having confcomms with their peer firms, but is shielding them from having that info leaking out.Closed-door industry-wide committeesWhat they can do is get behind a closed room- not just financial services people. Industry bodies are not just finance. But also closed door. Chatham House rules.ConsultantsDoesn't count if you’re paying a third party firm to do it. AMQP? OpenMQ? Cupid?InformallyPeople are geeks like you and me – they have lives outside their work – show up to meetups, will follow blogs, tweet, etc. Will advocate, tweet, tell their friends, we talk a lot… we just make sure it’s not directly linkable to the institutions that we work for.
- SLIDE: If you are doing OS work, and you want to know how you can tap some of this work and money, is -Have a vendor (someone they can pay)Don't chase tech fadsaplus.org (check)Communicate informally (if you force everything through an online non-anonymised process that can be googled, you’ll find that interaction rate is much lower. If it’s Meetups in major tech centers (NYC< London, HK, etc) you’ll find that people show up. If you have someone anonymously asking a question, get on the phone with them.) Often will engage in a more positive way when they know that it cant be tied back to their employment at their employer.