babis theodoulidis, jennifer wilby and david diaz centre for service research the university of...
Post on 28-Dec-2015
214 Views
Preview:
TRANSCRIPT
Babis Theodoulidis, Jennifer Wilby and David Diaz
Centre for Service ResearchThe University of Manchester, England
Knowledge-Intensive Service
Systems in the Financial Domain
Context
• Financial Domain– financial markets – monitoring and surveillance
• Applying Service System Modelling
Financial Markets - Overview
• The most efficient and effective mechanism to economic prosperity
• Structure– Stakeholders: customer, broker, regulatory body, data
and market venues – Market Venues: exchanges, electronic, Alternative Trading
System, Over-The-Counter, Systematic Internalisers
– Products: equities, derivatives and bonds– Jurisdictions: national, regional or global
• Principles– Market integrity– Market efficiency
Financial Markets – Key Drivers
• Technologies– telecommunications– automated trading
• Globalisation– cross-market, cross-jurisdiction
• Competition– Market venues, products, jurisdictions
FM - Monitoring and Surveillance
• Complexity of Financial Markets has increased dramatically
• High profile failures – Sub-prime mortgages, derivative contracts– HFT and flash crash
• Market efficiency and integrity have suffered
• SEC and EU public consultations to restructure financial markets
Knowledge-Intensive Services
• Service is the application of competence for the benefit of another entity; every exchange process needs to be understood as a service (Vargo & Lusch, 2004)
• service is value co-creation, i.e. useful exchange that results from communications, planning, or other purposeful and knowledge-intensive interactions between distinct entities (Maglio et al. 2010)
• KIS are services that rely on a continuous process of generation, acquisition and use of new information and knowledge or new combinations of existing information and knowledge (Madhaven and Grover, 1998)
Service Systems
• a configuration of people, technologies, organisations and shared information, able to create and deliver value to providers, users, and other interested entities through service (Maglio et al. 2008)
• Modelling “financial services” as service systems allows us to study their structure, reason about their properties and behaviour, understand their processes and test their validity in practice
FSS - Concepts
• Service– Trader – Venue: display book, company news, etc– Venue – Regulator: best bid, suspicious transactions,
etc
• Value-in-exchange– When a quote or bid is submitted and
accepted by the venue
• Value-in-use– When a trade closes
8
Rights No-rights
Physical 1. People
Individual investors, manipulators, traders, surveillance teams, broker dealers, head of SEC or FSA, etc.
2. Technology
ECNs, trading platforms, servers, data
warehouses, etc.
Not-
physical
3. Organizations
Regulators, broker-dealer companies, investment
companies, stock markets, etc.
4. Shared Information
Trading information, news, corporate information, etc.
FSS - Resources
Based on Maglio et al, 2010
FSS - System Behaviour
From Wilby et al, 2011
• Four-fingerprints of complex systems (Casti, 1992)– Irreducibility– Instability– Adaptability– Emergence
• Provide framework for classifications of relevant principles applicable
• Examine in the context of Financial Service System
FSS - System Principles
Irreducibility
• Study the “whole” as well as the relationships between the “parts” of the whole– Properties that cannot be discerned from the
individual study of the parts
• Holistic vs Reductionist– Decide what is relevant to the study (scope)
• FSS – Cross-Product– Cross-market– Cross-jurisdiction
Instability
• Complex systems are inherently unstable, moving between states of behaviour
• Instability is introduced by elements within the boundaries of the service system or the environment
• Maintaining the viability of service systems
• FSS– New technologies, new venues, new products– Regulations and policies
Adaptability
• Actors in service systems are not rational agents
• Their decisions and actions cannot be anticipated
• Learning and adaptation
• FSS– monitoring and surveillance– Auditing– Automated/manual adaptations
Emergence
• behaviour not previously predictable
• Creates the so-called “emergent properties”
• Relates to the other principles
• FSS– New manipulation scenarios
FSS – System Structure
• Service Customer– Investors, regulators
• Service Provider– SROs, non-SROs, regulators, third party providers
Customer
ServiceExperience
ServiceProvider
Taken from (Kwan et al, 2008)
Market Monitoring Value Propositions
Customer’s
NetworkMonitoring
& Surveillance
Value Proposition
Focal
Relationship
Value Proposition
Provider Partner
Network
Value Propositio
n
Regulator SRO
Central Tape
Manager
External Data
External Data
Provider
Text Mining
Service Provider
Based on (Kwan et al, 2008)
Market Monitoring Worldview
OutputManagement
OfflineEngine
Real TimeEngine
InformationManagement
Regulator
Live Data FeedProvider Internal SRO
Data
Factiva
Central TapeManager
Venue A
Text MiningSS Provider
Based on (Kwan et al, 2008)
Service Network – Single Jurisdiction
Based on (Kwan et al, 2008)
Summary
• Examine Financial Markets and especially, monitoring and surveillance processes as service systems
• Methodology to examine system behaviour as system of systems
• Produce a framework for the design of financial market monitoring systems (open – closed approach)
• Work in progress
Back Up Slides
• a collection of parts together with their relationships that forms a whole that serves a purpose that is meaningful to the system alone, that is, not to its parts or their relationships' (Boardman et al. 2008)
Systems Thinking
From Schoderbek et al, 1990
Archetypes
• stereotypical systemic configurations of entities and relationships
• Archetypes are composed of one or more types of relationships among variables, but in general, it is possible to identify two main types of relationships (Senge 1994). These are:– Reinforcing relationships, which consider
feedback interactions or loops– Balancing relationships, which consider tradeoffs
between variables, i.e., inverse relationships between them, for e.g., when one increase the other decrease, when one is activated, the other is deactivated, etc.
Intentionally Holistic KISS
From Wilby et al, 2011
top related