CBOE Takes 3D View of its Own Market Activity

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Just before Thanksgiving, the Chicago Board Options Exchange agreed to a multi-user license to use Aqumin's three-dimensional AlphaVision Enterprise Intelligence technology for a variety of data management and evaluation activities, Aqumin, a Houston-based financial services company, announced.

The move enhances, but does not replace, the sophisticated data management systems already in place at CBOE. But it is the first exchange client win for Aqumin, a two-year-old firm that specializes in turning large amounts of complex financial data into a clear visual picture. AlphaVision, in particular, allows investors to transform large streams of data into three-dimensional landscapes. This lets them easily identify peaks and valleys of interest and drill into them, quickly.

"This dynamic analytic tool presents information in a unique manner, allowing us to interpret data and evaluate business trends from a new and different perspective," said Edward Provost, executive vice president at the CBOE, which began rolling out AlphaVision on December 1. In a prepared statement, Provost said "this innovative technology [will be used] in the day-to-day operations of the exchange.''

AlphaVision will allow CBOE personnel to visually track, monitor and evaluate vital areas of interest faster, more efficiently and with greater accuracy than was possible before, according to Aqumin. AlphaVision will pull in data from Structured Query Language databases and employ eXtensible Markup Language tags, in order to create on-the-fly views or "landscapes" of the metrics that the CBOE wants to track.

"Large proprietary datasets maintained by the CBOE can now easily be ingested into our intuitive, visual 3D landscapes for CBOE's rapid interpretation of option trading activities across the entire market at once," said Michael Zeitlin, co-founder and CEO of Aqumin. "CBOE can now ingest hundreds or thousands of data points at one time that have to do with activity in the options market. What CBOE staff are looking for are exceptions, or market irregularities that are not necessarily wrong or illegal but unusual enough to warrant further attention as well as a tool to manage their business better."

Zeitlin noted that what makes this particular deal significant for Aqumin, in addition to the revenue, is that any exchange can benefit from using Aqumin's technology in its surveillance and regulatory work. "Unusual activity during a typical trading day can sometimes be difficult to spot-especially when the activity is reported as numbers in spreadsheets," said Zeitlin. "By converting real time data into AlphaVision landscapes, users can detect patterns instantly from the thousands of datapoints by using the mind's eye's capacity for instant pattern recognition."

Some trade exceptions might be indicators, for instance, of activity that could be construed as front-running by brokers that disadvantages investing customers.

"In the early days of the company people just saw this as a 3D visualization or a heat map," he said. "Now we're starting to gain traction, now that customers see how we're so much more than that...The advances in graphics, in particular, mean we were able to create a software technology that takes enormous amounts of financial data, incorporate the way financial professionals work and convert it into a set of moving images you can interact with instantly and drill down. You could be looking at a forest of trees and if only one tree starts to move, you can spot it and that's the same thing here, except you can click on it, drill down in seconds to see more."

In order to utilize AlphaVision, the CBOE purchased wide-screen monitors and also added graphics processing units, or GPUs, to take full advantage of the software, Zeitlin said.

"Before our technology came along, [financial professionals] would use spreadsheets and charts to find opportunity and it took a long time to drill down and discover and often what is important is missed," he said. "Personally, to me, spreadsheets are not a 'discovery' tool. Too many numbers. A spreadsheet is fine to report and summarize a much smaller subset of what you've seen using landscapes. In spreadsheets data goes hidden right in front of you. In AlphaVision, you miss nothing and see everything using landscapes you can touch, move and zoom into.

Zeitlin, who has over 25 years experience in scientific and business computing, is a recognized leader in visualization technology, having created the oil industry's first commercial 3-D visualization center. He began his career at Texaco as a Senior Scientist in 1980 and became a Texaco Fellow, Texaco's highest technical honor, in 1997.

In 2000, he started Magic Earth, a visualization technology provider that was acquired by the oilfield technologies firm Halliburton that same year for $100 million.

Adam Honore, research director with Aite Group, said the synergy between what the CBOE is offering and what Aqumin provides at the visualization level is "a unique entrant into exchange data solutions."

"We hear time and again from customers in vendor analysis that there is never enough thought to the user interface," said Honore. "It seems like the CBOE actually took time to think about the user experience...The city/skyscraper approach is easy to understand."

"As exchanges continue building out their market data service offerings, very few are providing tools for analysis and tracking," Honore continued. "Further, as market data volumes continue to rise, spotting opportunities becomes more difficult and expensive. To date, very little thought has been given to visualization tools capable of distilling relevant information down into something meaningful."

Honore said the only venue that currently offers a similar data visualization tool is Nasdaq OMX. Nasdaq, with its Nasdaq Market Replay, a replay and analysis tool, allows users to view the consolidated order book and trade data for Nasdaq, NYSE and other regional exchange-listed securities at any point in time, according to the company.

This article can also be found at SecuritiesIndustry.com.

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