Editor’s Note: For clarity, every reference to Hanweck regards the firm Jerry Hanweck founded, Hanweck. When referring to the individual after first reference, I simply use Jerry.

Real-time risk management — it might not be sexy, but it’s wildly important.

That’s the message from Jerry Hanweck, founder and CEO of Hanweck, a provider of risk management and options analytics tools. While real-time is a big focus for the firm, it is just one of many endeavors that Jerry and his team are working on.

In a sit-down with JLN, he provided his thoughts on the difficulties presented by huge data (“big” no longer encapsulates the trend), commoditization of options tools, the regulatory landscape, the company’s rebranding and revamping the Theoretical Intermarket Margin System (TIMS).

Hanweck is one of those firms that is positioned to benefit from the long term trend of large institutions refocusing their operations on the core aspects of their businesses. For example, as large banks did away with their prop desks, they removed a key source of revenue that drove much of their “enormous IT operations,” according to Jerry.

“The big banks are like super tankers — it’s very hard to turn those ships quickly,” Jerry said. “They disbanded the prop trading shops, they disbanded all of that stuff within the banks. That’s not going to turn around in an instant and come back. And I don’t think there’s a regulatory appetite for it anyway even under the new administration.”

Now, it makes much more sense to bring in an outfit like Hanweck to provide the risk analytics and data processing power, whereas pre-financial crisis a hedge fund or bank would have considered building all of those tools in house. Yet, these tools — specifically real-time risk monitoring — are more important than ever as companies become increasingly concerned with deploying their capital efficiently.


“Maybe 20 years ago, a retail broker who had their own vols and greeks could claim that sets them apart from their competitors,” Jerry said. “Today, that’s in some sense a commodity type of thing. In fact, you don’t want to be different from everyone, you just want to be consistent… It’s a lot cheaper and more efficient for us to provide it to many, many people than it is for each one of them to build it themselves.”

Compounding matters, market evolution continues to pressure technology to keep up so it is impossible, or at least imprudent, to rest on one’s laurels or embrace the status quo. The Options Price Reporting Authority (OPRA) feed represents some 300 gigabytes of data a day — that’s millions of messages a second coming at firms like a firehose. And the water doesn’t stop flowing. Ten years ago, processing the OPRA feed would have been much simpler as the data coming through it was “probably an order of magnitude less,” Jerry said. This is just one illustration of why the industry is turning more and more to specialist providers.

Hanweck is offering its expertise to an industry utility as well, the OCC. The central counterparty to the U.S. options industry is in the process of revamping TIMS, a system implemented some 20 years ago. It currently does not account for volatility shocks — that needs to be changed. But there’s another objective that faces even more of an uphill battle.

“Currently, there is no offset between SPX options and VIX futures,” Jerry said. “That’s a natural one where traders would like to see some kind of margining relief if they have offsetting positions in SPX options and VIX futures, because they’re tightly aligned due to their construction.”

They hope to have a new version of TIMS through the relevant regulatory hurdles by the end of 2017.



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