Data science has become an exceptionally powerful tool to analyse stock- and financial-market performance, which in turn drives improved operating abilities and unlocks new competitive opportunities. It’s used extensively across global trading markets and it’s no different for the JSE.

Data analytics provides valuable insight regarding market liquidity and trends, which helps users achieve new insights to identify opportunities for innovation and, ultimately, improve performance. The associated terminology is confounding but, in simple speak, data science is used by the JSE through the accumulation of big data, which refers to the ever-increasing volume of data that is too complex or large to be handled via traditional software applications.

This creates the need for data sets and new capabilities, one of which is tick-data analytics – a recent introduction to the JSE’s data-analytics portfolio – a result of a partnership with global executive analytics leader big xyt, whose client list includes many international stock exchanges and trading firms. Tick data is considered the lifeblood of trading in liquid markets and shows the price and volume of every point in increasing order of time. To provide some idea of tick data’s capability, consider that, in a highly liquid stock, there could be more than 40 order updates per second. The value-add the partnership with big xyt brings to the JSE is explained by Mark Randall, the JSE’s Director of Information Services.

‘The JSE will be drawing on big xyt’s extensive data-science experience in building complex metrics and in the provision of high-quality data and online analytics tools,’ he says. ‘What this means for us is that we can now provide deeper insight for market participants that will enhance their trading and risk-management capabilities.’

The addition of data-tick analytics will help JSE participants monitor and better understand execution patterns that drive their businesses; enhance their sales and marketing capabilities through insight to their market share within their market peer group; and robustly manage their operations because the highly granular metrics quickly highlight problems.

‘It’s an area that we identified as crucial to the future and will open many opportunities for our users,’ says Randall. ‘Tick-data analytics will be deployed as the main application for consolidating various internal and external data sources, all of which will be hosted and maintained by big xyt.’ The platform is cloud-based and provides a powerful visualisation tool, with single-click drill-down capability should more detailed information be required. The main user interface is web-based, quickly customisable and delivered with interactive dashboards. The application supports a growing number of use cases, primarily focusing on market structure, execution analytics and pre-trade cost estimations, but is also useful for strategy development, back testing, quantitative research and regulatory changes. Users are assured that the easily digestible information from the big xyt platform is transparent, accurate and normalised to trading conditions.

Through the system, internally the JSE will acquire greater market-quality capacity and more extensive market-summary analytics and insight. ‘The JSE will also benefit from big xyt’s relationships with the global trading community, which also includes sell-side, buy-side and independent analysts. This ensures continuous innovation of the product portfolio,’ says Randall. ‘Better yet is that everyone benefits from such focused innovation where and when it is demanded.

‘This analytics initiative from big xyt has expanded our existing capabilities, skillset and know-how,’ says Randall. ‘We have long learnt the value of leveraging external partnerships and are very excited to be partnering with a best-in-breed service provider to cultivate our internal data intelligence.’

By Kerry Dimmer
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