Q&A: NYSE CTO promises nimbler response with move to hybrid system

By Eric Lai, Computerworld
6 October 2006
URL: http://www.computerworld.com/action/article.do?command=viewArticleBasic&articleId=9003927

The New York Stock Exchange (NYSE) this morning launched the third phase of its Hybrid Market enabling members to buy and sell a limited number of stocks electronically as well as continue trading with human auctioneers on the Exchange floor. It’s the start of a major shift for the NYSE that involves 250 software releases, 60 upgraded systems and 1 million lines of code. NYSE CTO Steve Rubinow, who joined the NYSE Group Inc. last year after it acquired the Archipelago electronic trading system, is helping to oversee the launch. He talked to Computerworld this week before the launch about the challenges.

Excerpts from that interview follow:

You’re launching the NYSE Hybrid Market in the middle of a major market upswing. How difficult is that? When you’ve got a project that has much lead time and is as impactful as Hybrid, you can’t possibly guess what the market is going to be like on the day of the launch. You’ve just got to know that whatever it is, you deal with it. It also helps to have a strong support staff that’s able to troubleshoot and address issues efficiently and effectively at the source.

How did last weekend’s mock trading session go, when 6 billion shares — three times the Exchange’s normal daily average — were traded in two hours? It went well. As far as technology issues, there was nothing major, so that’s good news. As far as individual things we’re fixing, there’s nothing to comment on.

There’s talk that the NYSE is losing trade volume even on its own listed stocks to other faster electronic exchanges. How are you trying to make Hybrid more nimble? We all know for very good reasons, the NYSE-side systems needed some enhancement because speed historically wasn’t an emphasis for them. Now it is. A lot of the expertise from Archipelago, where there was a huge emphasis on speed, will be injected regularly here. We don’t want to have a situation where NYSE Group has both slow systems and fast systems. We want all of the systems to be as fast as the marketplace demands them to be.

How closely is Hybrid modeled on Archipelago? How does it deviate? As you know, Archipelago was purely an electronic system. The attempt to achieve the proper blend of floor-based and electronic activity — it’s unique. If you want to compare pieces of it — the electronic portion of Archipelago and the electronic portion of Hybrid — there are some similarities. There is no technology that was used in Archipelago that is being used today in Hybrid to date. It all originates from NYSE before the merger with Archipelago. It is mostly HP systems, ranging from Tandems to smaller HP servers running both HP-UX and Linux, along with some IBM. We have grid technology that uses data that comes out of the NYSE systems that feeds other applications, some of which are driven by a grid composed of HP equipment. But the core of Hybrid is not on a grid.

To build Hybrid, did you refresh a lot of equipment? Wherever we needed more capacity, we added more servers, but we generally didn’t get rid of the older stuff.

Are you moving more to Linux? For every new application, we talk about the possibility of using it on Linux, because of all the good things that Linux brings to the party. Again, these are the systems that historically came from the NYSE side of the overall NYSE Group. NYSE Arca, which used to be Archipelago, uses a lot of Sun hardware, with both Solaris and Linux.

Are you working with source code yet? We haven’t crossed that line yet and modified the source code for our own needs. We’ve thought about the advantages of doing it. But once you’ve done it, you’ve committed yourself to a support depth that you don’t have to do if you build right off the shelf with Red Hat Linux or Sun Solaris.

What redundancy and fail-safe mechanisms do you have in place? The same ones that the NYSE has always used. We have two data centers in the major metro area. We run pairs of mirrored redundant hardware hot in both data centers as well as local redundancy in each data center. The engineering model is the same as we’ve had for years.

When will the Stock Exchange move fully to electronic trading? That’s not what we are doing. It will be a mix of floor and electronic trading and our customers will determine the percentage mix of the two. Otherwise, we don’t have any plans beyond enhancing our systems. Our goal is to offer systems that cater to the needs of our entire customer base. NYSE Arca is a purely electronic system that complements the hybrid model.

What’s been determined so far in terms of how the pending merger of NYSE Group and Euronext NV will affect IT operations? Not very much. Hybrid is still very much front and center. But since the end of summer, when everyone came back from vacation, we’ve gotten more diligent about getting down to details. The technologists from Euronext and those from NYSE are sitting down at regular meetings and taking inventory of what we have. We’re making a level set. We all know integration takes time. Things will run independently for awhile.

Integration means different things to different people. At one end of the integration spectrum, one person could say that as long there is a wire connecting the two continents, the systems are integrated. At the other end, another person could say everything should run on one box and have all orders flow to that.

We have some financial targets to hit which will drive some decisions. [According to a mid-September filing with the U.S. Securities and Exchange Commission, NYSE Group hopes to save $455 million in the next three years through technology consolidation.] The more expensive decisions will be less favored. From a pure technology point of view, not a business strategy, I like things simpler with fewer moving parts. That will always be in the back of mind, though that will be governed by the realities on the ground.