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Advanced Research Technology Initiatives for the Commodity Futures Trading Commission

Solicitation Number: CFIT-11-SS-0095
Agency: Commodity Futures Trading Commission
Office: Office of Financial Management-Procurement
Location: Procurement Operations and Policy
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Sources Sought
Added: Mar 03, 2011 2:18 pm
This is not a solicitation, but a survey to locate potential sources capable of performing the work described in this notice. The Commodity Futures Trading Commission ("CFTC" or "Commission") is contemplating initiation of the first stage of its Advanced Research Technology Initiatives ("ARTI"), as discussed below.

Congress formed the CFTC as an independent regulatory agency to protect market users and the public from fraud, manipulation, and abusive practices in connection with the offer and sale of commodity futures and option contracts and to foster open, competitive, and financially sound commodity futures and option markets. In recent years, futures and options trading has expanded rapidly into many new markets beyond the traditional domains of physical and agricultural commodities. Trading facilities now offer futures and option contracts on a vast array of instruments, including single stock, environmental, performance measures, foreign currencies, U.S. and foreign government securities, and U.S. and foreign stock indices. Additionally, trading facilities have filed a significant number of new product applications and certifications, many quite innovative, covering a broad range of commodity types. The proliferation of electronic trading and new products has caused trading facilities to collect and use more data in the trading and trade clearing processes. Over a billion futures and option contracts have been traded annually on domestic trading facilities in recent years. Electronic trading is responsible for a major percentage of the overall market volume and that percentage continues to increase dramatically.

Futures and options trading provide participants with a means for managing or assuming price change risks and for discovering prices or disseminating pricing information. To safeguard the integrity of futures and options markets, the CFTC seeks to maintain trading in liquid, fair, and financially secure trading facilities by, among other things, deterring and preventing price manipulation and other disruptions to market integrity and by protecting market participants from fraudulent activity that could lead to potential market manipulations. Due to the dramatic increase of trading volume in the commodity futures market and the emergence of algorithmic computerized trading strategies as well as high frequency trading platforms, the Commission desires to broaden its technical resources for the oversight and regulation of these markets. CFTC seeks to acquire the means for detecting and analyzing market anomalies caused by computerized trading based on algorithms that execute large numbers of transactions in a very short period of time (e.g., thousands of transactions per second).

The Commission continues to make significant progress in updating its technology, data handling capabilities, and baseline analytical tools. To continue the improvement of its capabilities, CFTC has identified the following five areas where it is seeking outside assistance.

     1.  Analysis of large trader reporting system data (e.g., end of day positions);

     2.  Analysis of transaction level data (e.g., trades, orders, bids/asks);

     3.  Analysis of unstructured data (e.g., news feeds, contract market specifications);

     4.  Application of market surveillance intelligence solutions; and

     5.  Development of Trader Networks showing basic network properties as well as advanced structural statistics.

CFTC requires contractor support in developing and implementing a new class of Market Oversight Projects that utilize algorithmic anomaly detection and high capacity information technology resources (e.g., high-speed supercomputing capability for large data volumes and time intensive analysis).

The contractor(s) will also be responsible for providing (through in-house development or other means), implementing and testing specific algorithms for identifying possible systemic risk in financial markets. These algorithms will assist in market manipulation detection scenarios (i.e., models) based on the various data received on a daily basis from the exchanges and market participants. In addition to market manipulation detection scenarios, the contractor(s) will be responsible for developing, implementing, and testing algorithms in other CFTC business areas such as market compliance, economic research and analysis, and enforcement actions. These additional algorithms may require the contractor(s) to assist in data integration services that will incorporate various enterprise-wide data sources such as large trader end-day positions, daily market activity, indices, daily order information, trader account information, and third party data sources. The contractor(s) may be required to conduct further analysis and investigation which may require sophisticated queries, detailed and summary reports, data-mining activities, trend-analysis and statistical analysis.

Data, such as large trader end-of-day positions, market data, order data, and trade data may be provided by the CFTC or directly from other sources (both commercial and non-commercial). The contactor(s) will be required to follow strict security guidelines when handling data related to ARTI. Furthermore, data hosted by contractor systems will require direct access from CFTC personnel, either onsite or through a secure Virtual Private Network (VPN). The contractor(s) will be required to provide data processing and analytical results to the CFTC through secure File Transfer Protocol (FTP) in order for CFTC staff to further analyze algorithm outcomes.

CFTC is seeking one or more sources that possess the following capabilities:

     1. Using its (i.e., the contractor's own) technology resources, perform robust data analysis by incorporating various data abstractions and algorithms into a single anomaly detection method, which could be applied to structured data (e.g., orders and trade data) and unstructured data (e.g., emails). This also includes supporting multidimensional data mining for more explanatory power (e.g., uncovering new latent information and revealing subtle relationships).

     2. Ability to conduct predictive analysis techniques and methods to forecast and quantify potential adverse risk in the Futures Markets. This may include a combination of regression analysis, diffusion dynamics in networks, and sensor placement strategies in various networks.

     3. Ability to perform data analysis and anomaly detection techniques that are data agnostic (i.e., will work with any sort of reference data) and use a system of dynamic clustering.

     4. Ability to utilize a system of simulation technologies that use agent-based modeling, which could be applied to the Futures Market for testing out various regulatory scenarios as well as reconstructing markets for playback and investigative purposes.

     5. Ability to prototype and test process high-frequency data for complex analysis.

CFTC encourages sources that possess one or more of the five capabilities identified above to respond to this notice. Information furnished should demonstrate experience relevant to the proposed project and capabilities listed above, and should include:

     1. A description of the number and professional qualifications of scientists, engineers, technical and other appropriate personnel;
     2. Corporate experiences related to the proposed project;

     3. A description of general and special facilities, including technological capabilities of the contractor; and

     4. Other literature which demonstrates the capabilities listed above.

Respondents are not required to have performed work for, or related to, financial regulators or any of the financial markets to be considered qualified to perform the anticipated project. CFTC is seeking sources that possess the identified capabilities from both a technological and human capital standpoint to perform the data analysis tasks described in this notice.

This synopsis is for information and planning purposes, and the Government will not pay or otherwise reimburse respondents for information submitted. Based upon responses received, the Government reserves the right to set aside any and all procurements that may result hereunder for small or minority-owned businesses. If the evaluation of responses received concludes that none of the respondents have any of the necessary capabilities, CFTC may elect to task one or more Federally Funded Research and Development Centers to perform the work, pursuant to FAR 35.017. All responses are due by April 14, 2011 at 3:00 p.m. local (Washington, DC) time, and shall be submitted via email to the Contracting Officer identified in this notice.
Three Lafayette Centre, 1155 21st Street, N.W.
Washington, District of Columbia 20581
William M Roberson
Phone: 202-418-5367
Fax: 202-418-5414