May 12, 2009 See related feature: Wall Street Opens Doors to Open Source Technologies

In a move that may influence the impact of the Linux operating system on the larger financial industry, CME Group, the world’s largest derivatives exchange operator, is diving deeper into the open source movement.

Vinod Kutty, Associate Director and Head of Distributed Computing R&D, CME Group
Vinod Kutty, Associate Director and Head of Distributed Computing R&D, CME Group
CME is tapping into the “coreboot” project, an open source Free Software project designed to take the place of the proprietary BIOS boot firmware currently found in most computers’ motherboards, with the aim of using Linux to perform that hardware initialization instead. “We’re trying to work with our vendors to generate a next-generation platform which has Linux embedded on the motherboard of the server itself, and it would replace the proprietary BIOS,” says Vinod Kutty, associate director and head of distributed computing R&D at CME Group.

“We want to open up the hardware a little more. … It’s going to develop a new ecosystem because it will allow us to develop tools we couldn’t before,” he adds, outlining several performance benefits. According to Kutty, who is heading the initiative, servers utilizing coreboot (formerly called LinuxBIOS) will take less time to boot up, which will be especially helpful when recovering servers that have gone down, he notes. The change will also allow CME to run a stripped-down operating system, which would be less likely to display “OS jitter,” or performance impacts from the operating system on its application, than the firm’s current system, he explains. A third benefit, Kutty says, derives from the fact that embedding Linux in the operating system can also improve performance diagnostics — an important capability for CME, which operates in a low-latency environment and depends on diagnostics in case something should go wrong.

One of the financial services industry’s biggest users of Linux, CME Group began deploying Linux servers on a test basis in 2003 and officially headed down the migration path in 2004. Since then the number of Linux servers at the Chicago Mercantile Exchange has ballooned from 600 in 2004 to 4,000 in 2008. “We started with less critical applications that wouldn’t impact customers directly,” says Kutty. “It’s now our primary platform for most of our electronic infrastructure.”

Migrating Derivatives Trading

CME is migrating its vast Globex electronic trading engines and infrastructure over to Linux high-volume servers, though it still has some proprietary operating systems. According to Kutty, moving to Linux/x86 servers from proprietary Unix resulted in a 20 percent to 50 percent initial performance gains: “The combination of Linux and those platforms will give you the best performance for the price.” Economic constraints may spur the trend across the industry. “Even for firms using Linux, you will see more of a trend toward standardizing on volume servers which are the standards — AMD and Intel x.86,” predicts Kutty.”

Having an open source alternative has enabled CME to negotiate better contracts with Sun and other hardware vendors, such as IBM, Dell and HP. “Open source has changed what the market is willing to pay for the product,” says Kutty. For example, CME estimates it saved $600,000 in 2008 from the first phase of its multi-vendor hardware strategy.