Despite weeks of daily tests to the ensure company’s systems could handle its own Initial Public Offering, BATS Global Markets promptly noticed that they had a problem last Friday.
BATS aborted its IPO, retreating from the public rocks back to the starting blocks. And all this occurred on the same day The Wall Street Journal prominently featured BATS in its front-page story about an SEC probe into high-frequency trading.
Rocky Road
“It’s obviously a problem for an exchange to have that sort of issue hit them [on] their first IPO ever,” WSJ’s Jacob Bunge said in an interview Wednesday. BATS’ directors voted Tuesday to oust their chairman, Joe Ratterman, but keep him on as CEO.
The company’s rough patch is indicative of the economic recovery as a whole, which hasn’t exactly enjoyed smooth sailing. Some likened Friday’s incident to the May 2010 “flash crash,” in which a trading algorithm run amok slashed 700 points from the Dow Jones Industrial Average in mere minutes.
But others noted that circuit breakers worked as intended last week, averting catastrophe by halting BATS trading and annulling bogus trades. In fact, last week’s drama could further strengthen the SEC’s case for its “Limit Up-Limit Down” program, the proposed successor to circuit breakers, a commission pilot program due to expire this year.
For now, the folks at BATS will be working out the bugs. But a little more work is often necessary before many see the value in something.
That’s what regulators had to do with circuit breakers. And so did early adopters of Complex Event Processing (CEP) technology.
Solid as a Rock
“CEP technology is about to move from the backwaters of data management technology to center stage,” blogger Wayne Eckerson wrote in business intelligence site BeyeNETWORK on Monday.
“But, in reality, CEP offers more value than just pure notification,” Eckerson said. “In fact, in the age of Big Data, other use cases may come to the forefront and even give Hadoop a run for its money.”
Eckerson went on to list CEP technology’s four use cases, straight from the playbook of Neil McGovern, Sybase’s senior director of marketing and my fellow Trading & Risk Technology blogger. They are (1) Situational Detection, (2) Automated Response, (3) Stream Transformation and (4) Continuous Intelligence.
Rocking the Boat
Similar to CEP, analytics is also undergoing a renaissance, according to Sybase CTO Irfan Khan. It is still the domain of “data geeks” whose mathematical predictions track everything from national political elections to championship sports, but those dweebs are bringing analytics to the masses.
So BATS’ rocky start isn’t the end of the world -- not for BATS, and not for high-frequency trading. The world is changing, which drives evolution of regulations from circuit breakers to “Limit Up-Limit Down.” And it drives new adoption of older concepts, such as CEP and analytics.
“There’s no going back to the horse-and-buggy days of yesteryear,” as Georgetown University professor James J. Angel told Dealbook.
Indeed there is not. So here’s to rocky starts!
Related Articles:
BATS Trading Error Bolsters Case for Curbs by Michael J. de la Merced and Ben Protess
BATS Chairman Will Give Up Post by Jacob Bunge and Scott Patterson
Contemplating Alternate Realities While Paddling on (IBM) Streams by Wayne Eckerson