New York Stock Exchange announced last week that it's rolling out a Java-based trading system that includes customized wireless handheld devices for traders. The new technology could mean the beginning of the end to the shouts of "Buy" and "Sell" that have long been the trademark of the nation's oldest and largest stock exchange.
The NYSE awarded IBM a contract two years ago to build a stock order management system that would provide uninterrupted availability to its brokers, who now collectively send and receive an average of 75,000 messages per day -- up 200 percent from when the deal was signed.
The TradeWorks system will ultimately include 3,000 handheld devices custom-designed by IBM and linked over a wireless network to Linux workstations and HP-UX servers and to a mainframe-based back-end system running IBM's WebSphere middleware, DB2 databases and Tivoli management software.
IBM beat out bids by BEA Systems and Microsoft for the contract, said Willy Chiu, vice president of IBM's On-Demand Solutions Lab. Terms of the deal weren't disclosed, though Chiu said it was worth many millions of dollars and can be counted among the three most valuable IT contracts ever awarded by the exchange. Analysts estimated its worth at between US$100 million and $200 million.
The IBM contract represents the first time the NYSE has used a third-party developer to build a trading system. Roger Burkhardt, the NYSE's chief technology officer, said he's "very happy to be out of the business of writing middleware." The IBM work won't result in IT layoffs, he said.
Work on the back-end system has been completed, and 650 of the handheld devices have been distributed so far, Chiu said.
Response to pressure
The NYSE has been under pressure from all-electronic exchanges such as the Nasdaq Stock Market, which can perform trades faster. With this move, the venerable stock exchange is moving to become a hybrid that allows electronic trading and traditional floor trading to take place side by side.
"Part of the role of technology at New York Stock Exchange is to handle increasing volume with the same number of people," Burkhardt said. He said the NYSE and IBM put the new system through the most exhaustive tests ever undertaken at the exchange for any technology, spending more than a year testing before going live last month.
The NYSE's TradeWorks order management system replaces the Broker Booth Support System, which was based on C++ and built internally to connect floor traders to the brokerage back offices that executed the trades. The old system allowed brokers to send only one message at a time and didn't allow links to more than one system. TradeWorks can send three messages per second to telemarketers, broker-dealers and customers.
The older handhelds were consumer-grade products that required hourly battery changes and weren't tightly integrated with the back-office systems. The new handhelds offer more-powerful batteries, larger screens and 40 times more throughput than the earlier devices, Chiu said.
Under the new system, floor traders send data to traders, brokers and clerks using floor-based workstations to relay real-time market data from the exchange floor to trading desks upstairs. Data backup is managed by IBM's Tivoli software. A record of trades and customer information is captured in a DB2 database on an IBM zSeries mainframe on the back end, Chiu said.
Analyst Dave Cearley at Meta Group said the project marks a turning point for Java. "The interesting part is not simply what this provides to the New York Stock Exchange, but what this means for the larger position in the market for Java," he said. "This is not simply a statement of the scalability of IBM's proprietary technologies. It's also about showing the scalability and reliability of Java environments."