Nasdaq OMX said today it has completed the migration of eSpeed, its over-the-counter platform for electronic trading in benchmark US Treasuries to the Nasdaq OMX datacenter in Carteret, N.J., resulting in performance gains and cost savings for broker dealer customers.
“We’re excited about Carteret because of all the improvements it brings. It’s a complete reengineering effort,” says Joseph Noviello, head of Nasdaq OMX eSpeed, adding that Nasdaq has deployed eSpeed on "leading-edge equipment, servers, and infrastructure.”
The move follows Nasdaq OMX's acquistion of eSpeed, one of the largest electronic trading platforms for government bonds, for $750 million from BGC Partners in July 2013. At that time, Nasdaq announced its intention to move the platform from its existing datacenter in Rochelle Park, N.J., to Nasdaq’s facility in Carteret. The Rochelle Park datacenter will serve as a backup facility while Nasdaq OMX continues to work on securing a new backup site.
As a result of the “planning, hard work, and flawless transition,” Noviello says that Nasdaq OMX has achieved dramatic performance results. Specifically, round-trip order response time has increased by more than 25%, while reducing data distribution latencies by more than 100 microseconds. Customers “are not only able to place orders faster, but everyone is able to see those orders faster,” he told us.
These performance and latency gains are on top of systematic improvements that Nasdaq was working on. It set a goal to improve distribution latencies by 50% and was already up to 35% before the move. This increases it by another 25%, according to Noviello.
Now that eSpeed is located in the same datacenter, the exchange operator plans to start an expansion of its product set beyond benchmarks to other instruments and asset classes.
In the next few months, it plans to provide market data and order placement techniques, namely the ITCH data stream and OUCH order placement stream for eSpeed.
And third, it intends to extend beyond benchmark Treasuries to off-the-runs, Treasury swaps, and US Treasury bills. “You will see us begin to broaden our product set and offer electronic trading services for products today that are predominantly traded in a voice environment,” says Noviello.
“It was always challenging for us to continue to grow within the old infrastructure. This was a critical milestone.” Now that eSpeed is under Nasdaq’s control, Nasdaq’s infrastructure teams are monitoring the fixed-income platform, and they are assured it has capacity to grow.
Now that eSpeed is under the Nasdaq OMX datacenter, it’s side by side with Nasdaq Futures and Nasdaq OMX PHX for options traders. “You can make your own proprietary products.” According to Noviello, one goal is to develop proprietary products relative to fixed income, such as options and/or futures on US Treasuries.
Cutting costs for dealers
The move to expand eSpeed is also occurring at a time when the dealing community is cost conscious and its fixed income business is shrinking. “We feel through our technology we can bring more efficiencies, but at a more reduced rate than they are paying for voice brokerage,” says Noviello.
eSpeed is a sell-side oriented platform that caters to primary dealers, broker-dealers, and liquidity providers.
Given the sell-side’s cost concerns, Noviello predicts the entire sector is looking to embrace electronic trading more directly beyond the benchmarks. “They will benefit from speed of execution, more transparency in the orders, and we’ll be able to do that at a better price point because we’re not operating with the classic voice brokerage and brokerage operations that exist today.”
They can also cut costs by eliminating the need to maintain a presence in two datacenters. According to Noviello, firms that co-locate with Nasdaq in Carteret already will save tremendous amounts by ending their co-location presence in Rochelle Park and leveraging their presence and connectivity in Carteret.
Any trading firm that was co-located with eSpeed in the old datacenter had to make sure their presence in Carteret was suitable to trade on eSpeed, he said. A lot of clients had to validate their connectivity. “We had to plan with them and test with them.”
Another advantage is that Nasdaq can also leverage products and services available in Carteret such as taking the eSpeed data set and delivering it locally through the Metro Millimeter Wave, a point-to-point offering. They can also transmit data to Chicago via the microwave wireless network available from Nasdaq OMX access services. Also, eSpeed recently expanded its relationships with front-end software providers, such as Trading Technologies and Inforeach, along with market data providers. “There’ s a lot more services that eSpeed clients can now enjoy,” says Noviello.Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio