April 03, 2012

As the New York Stock Exchange prepares to start renting out computing infrastructure inside its Mahwah, N.J., data center in a few months, Feargal O'Sullivan is spending seven hours a day on the phone talking to prospective users and explaining terms and conditions.

Just three clients are using the infrastructure-as-a-service (IaaS) at this stage, however, and two of those, Millennium Partners and Pico Quantitative Trading, were mentioned when plans for the service were first announced last summer. The launch of NYSE IaaS is planned for the third quarter, O'Sullivan said. The effort marks the first time companies that aren't licensed NYSE members can rent a trading system and equipment inside NYSE's data centers. O'Sullivan is also bent on bringing in trading application providers and other services to offer a richer trading environment for third parties to employ.

O'Sullivan, who is NYSE Technologies' global head of alliances, is targeting any trading company seeking access to a first-class matching engine, high-speed information access and trades, and competitive rates. With hundreds of new hedge funds, index funds, exchange-traded funds, and other trading instruments created each year, he doesn't lack for prospects.

With the new 400,000-square-foot Mahwah facility, "we've got the place to bring in other providers of services, to have a community. We're trying to build the network effect," where the value of the NYSE exchange increases with its growing number of participants. NYSE has dubbed its IaaS offering the Capital Markets Community Platform. O'Sullivan refuses to call it a data center; it's a "liquidity center," he said in an interview.

[Take a virtual tour of NYSE Euronext's mammoth Mahwah, NJ data center by visiting WS&T's exclusive photo gallery.]

To keep its exchange a world focal point, NYSE Technologies needs to generate a wider trading community that both relies on NYSE's centralized data, and generates the trading that allows NYSE to continue to produce market-leading information.

The fortress-like Mahwah site is able to withstand 220 mph winds and a power grid outage. It's served by two electricity supplies and also has its own generators onsite. It opened last June, occupied by NYSE licensees that placed their own equipment in its colocation facilities. But there was another section, where racks of x86 servers running VMware virtualization software will supply IaaS to companies that are not exchange members. Traders who wish to avoid the latency induced by virtualization will be able to run on bare-metal servers.

In addition to offering its trading technology services, NYSE possesses a trove of historical market data and analysis, available as data services. Having a close proximity with a low latency level to the data in those services is desirable to firms that derive a trading strategy based on them.

New SEC regulations, based on the structure specified by Congress in the National Market System, require an exchange to be able to the check for the lowest price of an equity, whether on its own or some other exchange, and then match the buyer to that low-priced seller. A similar directive in Europe, the Markets in Financial Instruments Directive, placed a similar requirement on the European side of NYSE Euronext. The more trading going on inside NYSE's doors, the faster informed its systems will be and the more it will know about the context of the trades, said O'Sullivan.

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