NYSE Euronext is in the process of finishing an extreme makeover.
By the end of the year, it will have brought two big, new data centers online and phased out operations at 12 old ones. The move represents a half billion dollar investment in the midst of a severe financial downturn and positions the NYSE to become a global trading exchange over and above its role as a leading New York equities trader. For many years it has labored as the respectable, graybeard of exchanges, without the technological muscle of the distributed NASDAQ.
On March 5, one of the leading NASDAQ accounts, Charles Schwab, seeing the NYSE upgrade, shifted to the NYSE. "We're thrilled. ... Schwab is committed to advocacy, innovation, integration, and market quality. We're looking forward to partnering with them," said Duncan Niederauer, CEO of NYSE Euronext, in greeting the new trading partner at the time.
The Schwab attributes Niederauer cited are exactly the ones he's sought to embed in the NYSE since taking office Dec. 1, 2007. "We're thrilled we made the decision to upgrade as long ago as we did," Niederauer added in an interview March 9. "There's no question we have the market-leading offering, in terms of those two data centers."
NYSE also provides the core matching engine that conducts trades on the NYSE. A matching engine matches buyers to sellers, the first step in executing a trade. Most trading partners want their systems as close to the exchange's matching engine as possible, to execute the fastest trades.
NYSE left lots of room in its new 400,000-square-foot, Mahwah, N.J., data center and second new data center on the outskirts of London. Its partners' systems will be co-located. Each foot from the core NYSE systems adds a billionth of a second in processing time. Many trading partners will be just a few feet away, with an advantage over the bank or brokerage house that is triggering a transaction from its own system in Peoria, Ill., or Anaheim, Calif.
"Three years ago, banks would have said, 'We don't think of you as a leading edge technology company.' Three years ago, it would have been a short meeting," conceded Niederauer. Now banks, insurance companies, and equities traders like Schwab are coming to NYSE for technology trading services and financial data because, other things being equal, they're the lowest latency services available.
"We'll be a big provider of outsourced services," which will be a new business for the NYSE, said Niederauer. "You'll see us striking a few deals soon as a technology infrastructure provider, a hosted services provider," Niederauer said at the NYSE offices in Palo Alto, Calif.
Niederauer is talking now about changes that have been underway for more than two years because he thinks the time is right, even though some of the upgrade still needs to be implemented.
Charles Babcock is an editor-at-large for InformationWeek and author of Management Strategies for the Cloud Revolution, a McGraw-Hill book. He is the former editor-in-chief of Digital News, former software editor of Computerworld and former technology editor of Interactive ... View Full Bio