Archipelago is migrating its OTC stock trading business over to Sun Microsystems Unix-based servers, abandoning the Microsoft NT/Intel platform. Sun's track record coupled with cost savings as well as security and reliability were factors in the decision.
In a move to cut costs, boost speed, and increase its trading volume, Archipelago is shifting its OTC stock trading business over to Sun Microsystems Unix-based servers by the end of next month. This move comes as Archipelago transitions from an electronic communications network (ECN) into an electronic stock exchange.
Archipelago ECN is abandoning the Microsoft NT/Intel platform upon which the second largest ECN--after Instinet/Island--has run its entire OTC stock-trading business. Archipelago was often cited by Microsoft as a symbolic poster-child for running a mission critical securities application on NT. According to Steve Rubinow, Archipelago's chief technology officer, there are weaknesses in the Wintel (NT/Intel) architecture, which lacks a 64-bit processor, and costs associated with scaling up to hundreds of thousands of servers.
"In order to be the world class exchange that we would like to be, we have to think about how we're going to grow and things like scalability, reliability and also operating cost," explains Rubinow. "We did not see that we could get those kinds of things from our Wintel environment," says Rubinow. Representatives from Microsoft, through a spokesman, did not return calls seeking comment by press time.
The transition of Archipelago's OTC business over to Sun Fire servers began on February 14 and will be completed by the end of March. The OTC exchange will run on a range of Sun Fire servers, which operate Solaris 9, including the midrange 4800 server and some smaller ones, says Rubinow. Archipelago, the parent of Archipelago ECN and Archipelago Exchange (ArcaEx), will continue to run its listed stock trading business on the Microsoft/Intel platform at least until the end of the year. But then Rubinow expects to eventually consolidate both the OTC and listed exchanges onto a single platform, and probably it will be Sun, he says.
Sun was chosen because Archipelago wants an exchange-trading system that can handle a 300 percent increase in OTC trading volume. Today, the ECN runs its business on 1,000 Intel-based servers, but "as you scale and need hundreds of thousands of them," Rubinow says the "total cost of ownership" changes, since the additional servers are not inexpensive, plus there's the overhead of administering them, the need for a larger facility to house them and for additional staff to maintain them.
Citing Sun's longer track record and historical precedents, Rubinow says people building mission critical businesses in financial services that need to scale and work 24/7, tend to chose the Unix platform. "You don't see as many people doing it on a Microsoft platform as they are on a Unix platform." Although Rubinow admits that Hewlett-Packard and IBM have "the same kinds of products," he felt "Sun has more history there." Several electronic trading systems run on Sun, including London International Financial Futures and Options Exchange's Liffe Connect, Primex, Instinet and the Chicago Board Options Exchange. Another reason for choosing Sun was that Archipelago had acquired GlobeNet, a small ECN last year, which had been developing its platform on Sun. "It was not time to switch platforms but rather to keep the momentum going," says the CTO.
"What they've done is singularly smart," comments Miranda Mizen, senior analyst with TowerGroup. "Here is a credible ECN with good traction becoming an exchange and there isn't an automatic traction when you make a move like that." Brut ECN, a competitor to Archipelago, upgraded its technology to Sun last year, following its acquisition by SunGard, whose financial muscle allowed that, she notes.
By migrating to Sun, "they've significantly reduced the complexity of their systems," comments David Littlewood, global director of Sun Financial Services. "Managing a handful of Sun servers versus hundreds of Intel servers is significantly less complex," says Littlewood, who adds that Archipelago "can show significant performance increase and they've got head room to grow."
Stringent performance goals were required: the enhanced-exchange trading system for OTC stocks had to accept and book orders at 5,000 orders per second and provide up to 500 simultaneous customer connections. The maximum number of orders in a day required is 15 million and the maximum number of trades per day is 10 million with 15,000 events at its peak. Even though stock trading volumes are lower these days, Rubinow says the message traffic is pretty high because sophisticated customers are constantly sending out orders to test the market and then withdrawing them if they don't get what they want. "We have to accommodate all that message traffic even if a lot of it doesn't result in an actual trade," he says.
As an open electronic exchange that does its business through the Web, Littlewood says that because of Microsoft and Intel, Archipelago was vulnerable to viruses. "They got hit with every virus out there. If you've got a Solaris environment you don't have to worry about that," contends Littlewood.
"Security is obviously a very big issue on everybody's plate as well," agrees Mizen who says: "Speed, reliability and security are expected. The bar is now quite high on these because the markets are so fragmented, there's a much bigger choice of where you trade. If one system is slower or goes down at the peak times, you don't get a second bit of the cherry, she says, adding: "It's an unforgiving market to compete in." 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