Four Internet Protocol (IP) network vendors are currently working with some of Wall Street's largest players in 'Phase One' of a pilot program initiated by the Securities Industry Association (SIA). The pilot will address limitations in how securities firms communicate, with the goal of "establishing an industry program that can be offered to SIA-member firms," according to an SIA spokeswoman, who added that the organization would not comment further until a selection had been made. It is unclear what the SIA intends to do with the information gathered once the pilot is complete.
The vendors -- New York-based IPC; Reston, Va.-based TNS; Fairport, N.Y.-based Paetec Communications; and Peekskill, N.Y.-based Lexar " received a request for proposal (RFP), offering them the opportunity to pilot their IP services with volunteering Wall Street firms. The four were chosen in the February/March 2005 timeframe from a larger group, after each vendor presented its credentials to an SIA subcommittee in August of last year.
Behind the RFP
The RFP was written with Align Communications, a New York-based global IT solutions company that the SIA hired for assistance during the pilot and selection process. Earlier this year, SIA also brought in industry veteran Lenny Goldstein, a former Goldman Sachs executive, to assist with the process as well.
In April, IPC was informed that four of the participating firms had selected it as their vendor for the pilot, according to Marianne Leitch, vice president of services development for IPC.
The RFP asked the vendors to articulate an IP solution that could connect SIA-member firms by creating a resilient disaster-recovery-ready architecture. Such an architecture would need to allow member firms to make and receive calls from multiple locations in New York and the surrounding area, allowing a New York-based firm, for example, to access the private lines of its New Jersey backup trading floor.
The proposal also asked:
- how the vendor would deliver those circuits, including what kind equipment the firms would need on their premises, such as a router and gateway;
- how that would be managed;
- how customers would order new services;
- how the vendor would handle client moves, adds and changes;
- how BCP issues would be handled;
- whether circuits would be point-to-point or point-to-multipoint;
- whether support would be provided over IP for automatic ringdown (caller hits one button to initiate call), manual ringdown (called hits two buttons to initiate call) and hoot-and-holler;
- and information about the vendor's proposed architecture and engineering design which it had built or was planning to build.
The reexamination of those ringdown circuits may have been prompted by damage to Verizon's downtown switching station in New York on Sept. 11 and the communications outages that ensued, sources say.
Prepping for the Pilot
The SIA's goal through the RFP and pilot process was to audition vendors that could potentially offer upgrades to financial institutions, moving their ringdown circuits from either analog or digital technology to a point-to-point IP environment.
Though the RFP was specific in some respects, Leitch says IPC was not furnished a strict implementation plan.
"So I created my own," she says. "For all four firms, I created the documentation that would walk them through an implementation in terms of what equipment we were going to put on their site, power requirements, where things would be situated, a site survey ordering access circuits, what tests we were going to perform and when we were going to perform them, and what their performance criteria would be."
Alan Schwartz, senior vice president and general manager of TNS's Financial Services Division, says that had already been in production with some of the firms that he was asked to pilot. "It was kind of weird," he says, "because about 50 percent of the firms we have in the pilot were already doing business with us."
Nonetheless, TNS pushed ahead with the pilot, working with seven firms. "The SIA came back to us and said great, you can partake in this test program so contact these people and figure out what you are going to do. That was the directive. It wasn't, 'Here is the script for testing,' but more of 'Figure out what you have to install and do it," he said.
Leitch says IPC's first pilot participant firm will go live on May 20 and phase one should continue till around June 15 or 20. Phase Two, which will begin immediately after, will involve live communication between firms.
Vendors involved in the pilot have stressed that any inter-firm communication would strictly take place on private networks.
"We will not use the public Internet," says IPC President and CEO Lance Boxer. "We will use IP technology but will isolate it on dedicated facilities, dedicated servers in hardened central offices with the appropriate firewall technology. So I believe we can offer a strong alternative to private lines."
Schwartz says security and reliability must be second to none, as traffic between firms will be of the most sensitive nature.
"We are not talking about regular voice traffic, but rather a buy side trader at XYZ Firm talking to a sell side trader at ABC Firm on a turret system, or potentially traders in the same firm talking between multiple office locations," he says.
Leitch explains that the exact information flow of Phase Two has yet to be determined.
"All my pilot participants can connect up to each other in phase two -- IP-to-IP. In addition to that, they can, if they want, connect up to any of their customers (who may not be IP-enabled) using TDM-to-IP translation," she says.
IPC has committed to one of its pilot clients that Phase Two will be completed around the first week in June.
Regardless of whether it is chosen by the SIA, IPC will continue down the IP path. "I am building on a network which we have today that is a TDM-based switch network. We are implementing an IP layer on top of that network and building out our IP network," says IPC's Leitch.
TNS will also continue with its IP work. But rather than hastening the move to IP, Schwartz says, the SIA program may have inadvertently done the opposite.
"We were walking in tandem with some of the firms in the test in terms of installing production connections [before the pilot] so it is a weird scenario to be in," he says. "What the pilot may have done is delayed some of the aggressive roll-outs that some of the firms anticipated as we are all waiting for this to move ahead."
Leitch says that though IPC is fully committed to working through the pilot, it is unclear what lies at the end of the road.
"We really don't know what's going to happen. There are a number of outcomes that could emerge from this at the end of the pilot," she says. "[The SIA] may elect to go into a contract with one or more of the service providers to provide ongoing service to member firms which means they can or cannot elect to either use one vendor or use all four vendors and make them all available to member firms. We just don't know."