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Location:
QuantUniversity Meetup
8/10/2017
Regtech 101 + QuSandbox Demo
2016 Copyright QuantUniversity LLC.
Presented By:
Sri Krishnamurthy, CFA, CAP
www.analyticscertificate.com
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Slides will be available at: http://www.analyticscertificate.com/fintech
• Founder of QuantUniversity LLC. and www.analyticscertificate.com
• Advisory and Consultancy for Financial Analytics• Prior Experience at MathWorks, Citigroup and
Endeca and 25+ financial services and energy customers.
• Regular Columnist for the Wilmott Magazine• Author of forthcoming book
“Financial Modeling: A case study approach”published by Wiley
• Charted Financial Analyst and Certified Analytics Professional
• Teaches Analytics in the Babson College MBA program and at Northeastern University, Boston
Sri KrishnamurthyFounder and CEO
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Quantitative Analytics and Big Data Analytics Onboarding
• Trained more than 1000 students in Quantitative methods, Data Science and Big Data Technologies using MATLAB, Python and R
• Launching ▫ Analytics Certificate Program (Spring
2018)
▫ Fintech Certification program (Fall 2017)
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• August 2017▫ Machine Learning models for Credit Risk – August 13th ARPM NYC▫ Fintech Certificate Program(www.analyticscertificate.com/fintech ) Open
house – August 17th Boston
• September 2017▫ Creating Credit Risk models with Alternate data – September 26th
• October 2017▫ Fintech PRMIA event – Boston – Oct 3rd
▫ Big Data Bootcamp – Boston▫ Fintech Certificate Program – Boston – Launch!
• November 2017▫ ODSC West
Events of Interest
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• Boston
• New York
• Chicago
• Washington DC
• San Francisco
QuantUniversity meetups
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• According to the IOSCO Research Report on Financial Technologies(Fintech):
“The term Financial Technologies or “Fintech” is used to describe a variety of innovative business models and emerging technologies that have the potential to transform the financial services industry ”
What is Fintech?
https://www.iosco.org/library/pubdocs/pdf/IOSCOPD554.pdf
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• Offer one or more specific financial products or services in an automated fashion through the use of the internet.
• Unbundle the different financial services traditionally offered by service providers -- incumbent banks, brokers or investment managers.
For example:
• Equity crowdfunding platforms intermediate share placements
• Peer-to-peer lending platforms intermediate or sell loans
• Robo-advisers provide automated investment advice
• Social trading platforms offer brokerage and investing services
Innovative Fintech business models
Ref: https://www.iosco.org/library/pubdocs/pdf/IOSCOPD554.pdf
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Fintech being noticed by Regulators
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• Technologies like:▫ Cognitive computing
▫ Machine learning
▫ Artificial intelligence
▫ Distributed ledger technologies (DLT)
can be used to supplement both Fintech new entrants and traditional incumbents, and carry the potential to materially change the financial services industry.
Emerging technologies
https://www.iosco.org/library/pubdocs/pdf/IOSCOPD554.pdf
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Technology enabling the creation or transformation of business models for reporting, monitoring & compliance in highly regulated industries
OR
Delivering regulatory compliance through technology improving upon current and traditional ways
What is Regtech?
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•Scenario analysis, modeling and forecasting
•AML, Fraud detection
•Monitoring payments and transactions
•Trading analytics
•Regulatory compliance and tracking model changes
•Model risk, Stress testing etc.
Opportunities for companies
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Companies in this space
Source: https://letstalkpayments.com/regtech-companies-in-us-driving-down-compliance-costs-innovation/
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• The regulatory sandbox allows businesses to test innovative products, services, business models and delivery mechanisms in the real market, with real consumers.
• The sandbox is a supervised space, open to both authorized and unauthorized firms, that provides firms with:▫ reduced time-to-market at potentially lower cost▫ appropriate consumer protection safeguards built in to new products and
services▫ better access to finance
• https://www.fca.org.uk/firms/regulatory-sandbox
Regulatory Sandboxes
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Who the sandbox is for:• Businesses seeking authorization▫ The sandbox may be useful for firms that need to become authorised
before testing their innovation in a live environment.
• Authorized businesses▫ The sandbox may be useful for authorized firms looking for clarity
about rules before testing an idea that doesn’t easily fit into the existing regulatory framework.
• Technology businesses supporting financial services firms▫ Technology businesses that want to provide services to our regulated
firms (eg: through outsourcing agreements) can also apply for the sandbox if they need clarity about rules before testing.
Regulatory Sandboxes
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US Regulators catching up
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• Creating internal labs or innovation houses▫ Manulife - LOFT
▫ DCU – Fintech Innovation center
• Partnering or prototyping Fintech solutions▫ Fidelity promoting Fintech Sandbox
• Internal Innovation to replicate Fintech business models▫ Fidelity Go
What are companies doing?
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Model Validation
• “Model risk is the potential for adverse consequences from decisions based on incorrect or misused model outputs and reports. “ [1]
• “Model validation is the set of processes and activities intended to verify that models are performing as expected, in line with their design objectives and business uses. ” [1]
• Ref:• [1] . Supervisory Letter SR 11-7 on guidance on Model Risk
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Popularity of Open-source software in the enterprise increasing
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• Financial Services customers like Capital One, FINRA, and Pacific Life are moving critical workloads to AWS
Cloud maturing
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• Versions and packages
Challenges in adopting Open-source software in the enterprise
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• Difficulty in replicating and reconciling differences in environments
Challenges in adopting Open-source software in the enterprise
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• Deploying models built by Data Scientists still a problem
Challenges in adopting Open-source software in the enterprise
Data Scientists Enterprise IT
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• The Try before adopt model is difficult with unproven open-source solutions
Challenges in adopting Open-source software in the enterprise
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Quant/Enterprise use cases• Create an environment that can support multiple platforms and
programming languages• Enable remote running of applications• Ability to try out a Github submission/ someone else’s code• Facilitate creation of Docker images to create replicable containers• Create prototyping environments for Data Science/Quant teams• Enable Data scientists/Quants to deploy their solutions• Enable running multiple tasks and jobs• Enable concurrent running of multiple experiments• Integrate seamlessly with the cloud to scale up computations
Use cases
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Fintech use cases
• To demonstrate solutions to enterprises
• Create customized enterprise trials for companies that don’t permit installation of vendor software prior to procurement
• To manage quick updates
• Enable effective integration and hosting of services (REST APIs)
Use cases
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Academic use cases
• Enable creation of course material and exercises that could be shared
• Enable students and workshop participants to focus on the data science experiments rather than environment setting
Use cases
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Creating replicable environments
Creating and manage replicable environments (Code + software + data) in a single portal
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Creating replicable environments
Create replicable environments (Code + software + data) through a easy point & click tool and publish to Dockerhub or manage internallyShare it with target users
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User portal
• Run multiple experiments in pre-created environments (Code + software + data)• Deploy your own solutions• Run any Docker image or Github submission on the cloud
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Run Jupyter notebooks and prototype applications
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Run Rstudio and Shiny applications
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Run any Docker application
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Manage tasks and errors
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User portal
• Dockerize and deploy applications on AWS in just a few steps
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Deploy applications with ease
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Open source project
Thank you!Checkout our programs at:
www.analyticscertificate.com/fintechwww.qusandbox.com
Sri Krishnamurthy, CFA, CAPFounder and CEO
QuantUniversity LLC.
srikrishnamurthy
www.QuantUniversity.comInformation, data and drawings embodied in this presentation are strictly a property of QuantUniversity LLC. and shall not be
distributed or used in any other publication without the prior written consent of QuantUniversity LLC.
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