Capitalizing on its acquisition by SunGard, Brut, LLC spent nearly $5 million upgrading the Brut electronic communications network (ECN) with the purchase of Solaris-based midrange servers from Sun Microsystems.
Leveraging the deep pockets of its parent company, the nation's third largest ECN installed Sun Fire V880 enterprise services running the Solaris operating system."This affects three major areas: speed, our reliability/ stability and also our capacity," says Brian Hyndman, president of Brut.
Since being acquired by SunGard in August of 2002, Brut has nearly doubled its market share, says Hyndman, who attributes the reasons "to more flexible pricing, a quicker system and also participation in SuperMontage."
"We knew that when SunGard acquired us, we didn't want to be a niche player," says Hyndman, noting that Brut - founded in 1998 - was doing roughly 4 percent of Nasdaq volume, "and kind of going sideways for a year and a half." "At that point we knew we had to do an upgrade," explains Hyndman. Brut drew up a plan in September and completed the technology upgrade in February. While the hardware gave Brut speed and reliability, porting the software from a 32-bit to 64- bit architecture, is what enabled Brut to exceed its current order-handling limit.
"Before we could handle two million orders a day, now we can handle four times that," asserts Hyndman. On top of that, Sun helped Brut segment the system from four to 16 segments. "That really gives you greater throughput capacity so you can handle more orders per second," he says.
In the past, 95 percent of Brut's order flow came from the market-making community. But today 45 percent comes from market makers, while 55 percent is divided among black box, program trading and day trading sources. Why has the diversification happened? "Because of our upgrade, because we are quicker and more reliable," says Hyndman, noting that "the program-type customers are very speed and time sensitive."
"Brut prides itself on speed. It's one of their factors," comments Miranda Mizen, TowerGroup senior analyst.
Rather than consider alternatives such as Windows or Linux - a cheaper Unix-based operating system - Brut chose to stay with the Sun Solaris operating- system-infrastructure. "That really gives us the robustness that we need to process eight and ten million orders per day," says Hyndman.
According to Damon Kovelsky, an analyst with Financial Insights, Sun is more expensive, "especially in upfront costs. The hardware and the software are more expensive than Windows. But it is optimized for much higher volumes which is why it was the darling of Wall Street and it can handle much more complexity," he says.
According to Sun's Web site, the Sun Fire V880 Server comes with up to 12 processors, offers full hardware redundancy and a variety of mainframe-class availability features such as hot CPU upgrades and dynamic reconfiguration.
But the technology upgrade has already started to pay off.
According to the latest Nasdaq statistics, Brut was the fourth largest liquidity provider to SuperMontage, for the week ending April 28, accounting for 6.5 percent of the volume.
Over the past seven months, Brut has increased its trading volumes by more than 50 percent - attaining a record 163 million shares in March - and become the largest ECN participating in SuperMontage - Nasdaq's automatic execution system.
Now with the upgrade, Brut is positioning itself to grow up to the 10 and 12 percent market, says Hyndman. "The competition is the other main ECNs out there and this gets us on par and actually puts us ahead of the others in certain areas like speed."
But the technology upgrade is not over, says Hyndman, who notes the ECN has hired a consulting firm called Enform that is working on ways to optimize the architecture. "So instead of constantly buying hardware, they're finding ways to optimize the system to make Brut quicker and more reliable." 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