The International Securities Exchange, an all-electronic U.S.-equity options market, is thinking about whether it should create a third trading site, in an effort to further solidify its disaster-recovery strategy. Separately, targeting broker/dealer members that want to access the exchange via the Internet, the ISE is developing a Web-based version of its Click front-end workstation software.
Headquartered in downtown Manhattan, the ISE already has a fully redundant back-up site based in Jersey City, N.J. However, to make sure that it has all of its bases covered in the event of another disaster, the exchange is pondering whether it should develop a third remote site. Such a facility, says ISE Chief Information Officer Daniel Friel, would not necessarily serve as just an emergency back up to the Jersey City office. "When you have a primary site and a back up site, then your technology architecture design is actually fairly straightforward, (because) you have a choice of a or b. But if you introduce a third site, that opens up a lot of opportunities. So maybe you don't have primary and back-up sites. (Instead), you may run some functions live out of all three sites," he explains.
In that scenario, the ISE would have its hardware and network infrastructure evenly distributed across the three sites, and would be able to protect its key personnel by basing them in three separate locations. Noting that just getting out of lower Manhattan was a challenge in the days following 9/11, Paul Bennett, the ISE's senior vice president of market operations, says that, going forward, the exchange's business-continuity planning is going to center around "people, location and movement."
From a technology perspective, Friel says, the ISE felt it was well-prepared for 9/11. "We have fully symmetrical and redundant configurations across two data centers, one here in downtown Manhattan and one in Jersey City. Either site is capable of running the (ISE) market at full capacity, if it had to, in a standalone mode," he says. "We were in fact ready to open the market, from either of our sites, on September 12."
However, the ISE, like everyone else in downtown Manhattan, experienced an extreme amount of difficulty relocating its key people after the Twin Towers were destroyed. That's why, says Bennett, the ISE is considering a scenario in which it would distribute each of its functions across three separate sites. "We have made no firm decisions at all about a third site implementation. We're just considering that," Bennett emphasizes.
Friel says that the exchange's business continuity planning team plans to present a list of disaster-recovery alternatives to the ISE's management team by the fourth quarter. In addition to mapping out its own solutions, the ISE is also trying to concoct a more comprehensive disaster-recovery plan for its members. "We are evaluating what facilities our member firms need, in terms of connectivity to ISE. Today, we say to our primary market makers that it is mandatory for them to have a second (order-routing) connection to us. But we do not say to them that it's mandatory for them to have a second (back up) site. Now we're considering that," says Bennett.
Apart from re-evaluating it disaster-recovery strategy, the ISE is also working on a handful of important technology projects, including an upgrade of its Click front end. One of the limitations with the current version of Click, says Bennett, is that broker/dealers that want to use the exchange-provided order-routing mechanism must have a "dedicated telecommunications link to the ISE." But the exchange is now building an Internet-friendly version of Click, which will allow users to route orders to the ISE's matching engine without having to create a dedicated telecom interface. "Now we're going to make our front end accessible over the Internet ... (and) that may enable us to extend our distribution network," says Bennett.
Some of the ISE's existing broker/dealer members, he notes, have offices overseas, and they may be willing to expand their use of Click if they can offer their international colleagues cost-efficient access to the exchange. A "couple" of ISE members are already using the Internet-based version of Click, Bennett says, in a pilot mode. The exchange expects to go live with the Web-enabled version of its front end before the end of this year.
Launched in May 2000, the ISE now ranks as the third-largest U.S. options exchange, volume-wise, trailing only the Chicago Board Options Exchange and the American Stock Exchange.