August 04, 2010

Technology has always been a core part of the capital markets. Today, however, IT has become just as important — if not more important — than the actual financial products the technology supports.

This is especially true at exchanges. No longer are physical trading floors the primary product, or service, of exchanges (although some exchanges, including CME Group and NYSE Euronext, continue to run traditional trading floor operations). Rather, today electronic trading venues are the primary products of most exchange operators.

For instance, on the CME, the exchange that handles futures and options products that cover all major asset classes, nearly 84 percent of all contracts traded in 2010 have been executed via electronic trading. Meanwhile, overall volumes also have been soaring: The average daily volume on the exchange for the year has been 12.7 million contracts per day, up 23 percent from 2009, according to the exchange. On average, trades on CME Globex, the exchange’s electronic trading platform, are executed in less than 5 milliseconds, with some of CME Group’s markets already trading at 2.5 milliseconds, the firm reports.

Leading the technology effort to provide CME Group’s customers with the fastest marketplace is Kevin Kometer, a 16-year veteran of CME Group and currently the exchange’s managing director and CIO. Kometer, who started at CME Group as a programmer analyst in 1994, was manager of trading floor technology before a number of additional promotions eventually earned him the CIO role. As a result, he has been able to view CME Group’s technology evolution from a variety of vantage points over the years. “The interesting thing about the evolution is that the technology is now becoming the product and service,” he says.

John Fiore
Larry Cohn
Christopher Peretta
Andrew Haines

“With each acquisition,” adds Kometer, referring to the 2007 acquisition of the Chicago Board of Trade (CBOT) and the 2008 purchase of New York Mercantile Exchange (NYMEX), “we increased the size of IT, and we had to scale out and expand our capabilities.” CME currently has 850 information technology employees and approximately 150 consultants, with most of the workforce located in the Chicago area. A New York-based team, the firm’s second-largest ITgroup, primarily is working on CME’s OTC clearing services offering, ClearPort.

Kometer says one of his toughest challenges has been managing the growth of the business and his technology team. “As the business grows, there are obviously increasing demands,” he notes. “We have to prioritize with the business so IT is always working on the most important initiatives.”

And with technology becoming such an important part of the business, Kometer says, CME Group is always searching for new technology products. “We are constantly analyzing our own systems,” he reports. “But any new technology that we use has to meet strict requirements around performance and reliability.”