Modern financial markets are a complex labyrinth of financial transactions that span the globe. Market developments over the past 5 to 10 years have seen the criss-crossing of previously separate financial markets and the engineering of financial instruments designed to make money out of risk transfer amongst a growing number of financial intermediaries and corporations. So complex is the entanglement of financial markets, financial instruments and the risks they are engineered around and which such instruments transport from market niche to market niche, from one part of the globe to the next, that arguably neither the financial agents themselves nor official regulators, such as the Bank of England, know 'where risk lies', as perhaps the recent sub-prime crisis and its aftermath illustrates well. If this is the case then impaired vision is less than helpful: there's a need for fresh eyes to make sense of the data, the numbers, so as to see risks and opportunities more clearly amongst continuous streams of data confronting financial market participants. Against this background, this short web essay offers a taste of the sorts of visualisation techniques and software currently being developed for use in key financial markets. The techniques seek to equip market participants with improved vision and visual imagination to help them make better sense of the make-up of markets.
The visualisation software transforms numbers, the dominant currency as it were of financial markets, into colours shapes, sizes, and animation, to aid the processing of large data sets and market reports to help in the task of making sense of what's going on, what has happened and importantly what might happen. These data are a mix of those that are publically available (for example, those produced by the IMF or market exchanges, such as the London Stock Exchange), as well as proprietary data, those produced in-house by financial organisations.
The software is being developed by two main groups. First, by software developers not directly active in financial markets; these companies will often work with financial organisations to provide visualisation capabilities to help leverage, to enhance, an organisation's existing data management and proprietary data feeds, such as key trade indicators and processes for tracking trades and risks through their organisation. The most successful of these firms are often 'design centric' rather product centric, particularly where the product is an adapted import from non-financial markets. This recognises that the desire for the ability to revisualise markets and market components is actually highly fragmented: what financial agents want to see and how they want to see, to visually interpret unfolding market action, will differ (if only slightly, in some cases) from market to market, from organisation to organisation, and from team to team (and even amongst team members) within organisations. Moreover, how integrated the visualisation software becomes in the calculative practices of financial organisations is very much a choice of individual clients. The visualisation techniques in this web essay in other words are simply illustrations (drawn from interviews in London and New York) of a trend towards the incorporation of visual aids or devices in to the calculative practices of finance, rather than definitive examples of how all agents, in all markets, are utilising visualisation.
The second group is made up of financial organisations themselves, particularly those in large complex financial institutions, firms that have employees with titles such as 'Chief Software Architect' responsible for an organisation's 'computational architecture'. Such organisations may well mix proprietary software with that developed by secondary economy companies.
Both groups share a common aim: to develop visualisation techniques to figure out just what's going on; to find ways to re-interpret data and make better informed judgments about what is happening and likely to happen, and just what the numbers might mean.
The rise in the use of visualisation software and techniques of visualisation to make better sense of financial markets and their associated data flows, suggests that there are changes afoot in the ways in which financial calculations are conducted. Equipping financial agents with fresh eyes also raises questions about how knowledge in large part produced visually shapes the relationship between financial markets and the world. But this is a big issue, far beyond the scope of this small contribution.
The web presentation that follows divides into four sections and links to the CRESC working paper no 42 on the same theme.