Tim Bass
Mon, 23 Jun 2008 13:38:13 +0000
In Tech Spending Hit by Subprime Mess, Jeffery Schwartz says,
�According to Tabb, spending on development is being refocused on projects that can help firms improve their margins and, not surprisingly, do a better job at risk management. As such, investments in capabilities such as algorithmic trading and complex event processing (CEP) are likely to be pivotal in some firms� efforts to become more competitive and improve their efforts at mitigating risks.�
�But for some banks that have deployed such technologies � the now-defunct Bear Stearns, Lehman Brothers, Citigroup and Merrill Lynch � the question is: How did these companies fail to mitigate the risks that have slammed their businesses if their development teams were developing and deploying sophisticated systems?
�There is definitely an awareness that perhaps the systems that existed in place to assess the value of portfolios or judge risk [are being scrutinized],� said Stevan Vidich, an industry architect in Microsoft�s financial services group. �
He added that there is strong interest in CEP and other risk management methodologies. A growing number of shops have started deploying such solutions based on the .NET Framework, Vidich said, and he believes such investments will continue.
�Clearly, there�s a lot of need to deal with the immense influx of data and being able to analyze data in a timely manner,� Vidich said. �It also drives need for systems like business intelligence, or BI, applied to a near-real-time scenario, which is a very attractive proposition.�
What are these guys on Wall Street smoking?*
This is the precise �over hyping� problem I have warned about repeatedly.** Folks selling rule engines that perform basic calculations over a time window of streaming data have been marketing their wares as �superbrains� that can solvevery complicatedproblems and, at the same time,save WallStreet andThe Planet.
Let me be perfectly clearhere Wall Street.* Listen very carefully.
There is nothing in any of the so called CEP productsin the market placethat is going to stop losses related to the subprime meltdown*effecting the �now-defunct Bear Stearns, Lehman Brothers, Citigroup and Merrill Lynch,� as Jeffery Schwartz implies.
To imply that the risk management (and corporate goveranace)required to mitigate the current crisis on Wall Street can be forseen, solved, or even mitigated,by a rules engine (or any*software)is complete and absolute fantasy.
I think the fever created by the subprime flu is putting folks on Wall Street, or at least the vendors and the analysts pandering to them, in a Capital Market CEP Fantasy Land.
*
