NYSE Euronext Innovates at Warp Speed

By Gregory MacSweeney, Wall Street and Technology
19 October 2009
URL: http://www.financetech.com/showArticle.jhtml?articleID=220301356

Communication. It’s been a challenge ever since humankind first walked the Earth. First sounds, then speech, then writing. Today communication in all its forms — written, voice, video, e-mail, instant message, Twitter — is propelling business at a blinding pace.

For Steve Rubinow, EVP and co-CIO at NYSE Euronext, communication obviously is important to his business. Slow or ineffective communication would send customers to other exchanges that communicate faster or more accurately, or both.

But Rubinow also knows that good communication — on a personal level and across NYSE Euronext’s global footprint — is vital to his success and the success of the exchange. “My father instilled in me from a very early age the importance of communication skills,” Rubinow relates. “Your ability to communicate orally and in writing is vital. No matter what industry you are in, your ability to communicate is a big part of success.”info-boxes_rubinow

Rubinow works to ensure that he is able to interact easily with other managers and that NYSE Euronext is making it as easy as possible for all employees to share ideas and collaborate. “Just as we try to remove as much friction from trading as possible, it’s important to remove friction in our communication systems,” he says.

To foster communication with his staff, Rubinow has located as many key people as possible on the same floor as his New York office, at 11 Wall Street. “I want to be able to bump into the people I need to work with in the hallway,” he notes. “If I have to take the stairway or elevator, that injects a little bit of friction into the communication system.”

And Rubinow doesn’t just move people to different floors to facilitate better communication — he even will move them to a different continent. When NYSE Euronext began work on its universal trading platform, a single platform that eventually will trade all products across the globe, the development work was mostly being done in Europe. “We took our best U.S. developers and they went to Europe for about six months,” Rubinow recalls. “They were solving problems in a live environment. Someone has a problem, so they shout it out. Someone else helps solve it, and you move on to the next item. Sure, they could send e-mails back and forth for months. But if everyone is together, the project is completed much faster. Problems were solved quickly. We are trying to do more of that with important projects.”

But couldn’t NYSE Euronext have accomplished the same goals if it created a virtual environment with IM, video chat, wikis and other Web 2.0 tools to help developers collaborate — all while keeping them at their home office (with much less cost)? Possibly, Rubinow acknowledges. But, he contends, there is no substitute for a live work environment.

“There is no question in my mind: There is nothing that beats having people working together in the same place,” Rubinow stresses. “This is why some of our smaller competitors may have an advantage in the beginning — because they all sit in the same room, all of their ideas are heard at the same time. No one has to send an e-mail across the country to discuss what was said because everyone who needed to hear it was in the room. They can act on things quickly.”

Rubinow knows about the value of smaller working teams. When he was CTO of Archipelago, the then small electronic exchange was able to move quickly and implement new technologies with a very small staff. Today, according to Rubinow, fostering better communication in small groups will help bring that same entrepreneurial spirit and productivity to the much larger and more complex NYSE Euronext.

Social Networking

For smaller projects and day-to-day work, NYSE Euronext does employ many communication tools that are now commonplace in many organizations, including instant messaging, wikis and especially videoconferencing (both on the desktop through simple webcams and in videoconference rooms for larger meetings). “There is a big difference between visual and non-visual communications,” Rubinow notes. “The facial expressions and body language is a huge part of communication.”

For times when face-to-face — or webcam-to-webcam — interaction isn’t possible, Rubinow is looking at alternatives, such as Second Life. “We are beginning to experiment in Second Life,” he says. “We are going to use it as one more collaboration tool. I have tried it personally. … We’ll see if it is a fit here, or we’ll see if it is just a novelty.”

Still, Rubinow’s organization isn’t being recognized as one of the industry’s most innovative companies because it makes internal communication easy. Under Rubinow’s direction over the past couple of years, NYSE’s Euronext’s technology organization has undertaken some enormous projects — most recently the universal trading platform (UTP) and the build-out of two new data centers, and previously integration of Archipelago and the Hybrid — all while upgrading capacity, lowering latency, dealing with regulatory change (Reg NMS), and lowering costs and reducing staff.

According to Rubinow, the UTP, which went live in Europe this year and will roll out in North American in 2010, is helping to simplify the exchange’s trading systems across asset classes. “The principles of trading are the same no matter what asset class,” he asserts. “The rules are different in different markets, but it is just business logic surrounding the core trading platform that is working to get buyers and sellers together in the easiest way possible with the least amount of friction. That’s our job.”

The thinking behind the UTP is that across all of the markets that the NYSE serves, it doesn’t need 50 different variations of systems that basically do the same thing: trade. “It is inefficient and doesn’t scale well,” Rubinow says. “What we are trying to do is have a universal way of doing this and to have it modifiable for local needs, but not be a separate version. We can make changes globally quickly because we are working on the same platform, and we can be do it more cost effectively.”

And for customers who are trading in more than one asset class or more than one marketplace, the UTP also offers simplicity. “For those people that want to trade across asset classes or geographies, the more consistent the systems, the easier it is for them,” Rubinow suggests.

Sustainable Advantage

In addition to the UTP, the exchange also is building two new data centers, one in the U.S. and one in Europe, that will serve as NYSE Euronext’s technological foundation. But, Rubinow adds, his team is designing the data centers to be cutting edge not only today, but also for the foreseeable future. “Technology advantages are hard to sustain,” he concedes. “A data center is a 10- to 15-year decision, from start to finish. It’s hard to figure out what technology you will need down the road. We are trying to build these data centers in a way where we can have a sustainable competitive advantage for a long time to come.”

In order to do that, the exchange obviously is using some of the latest technology, processors, servers and networking technology. But it also is rethinking the way the entire data center is built. In order to maintain an advantage, Rubinow relates, he is looking for ideas and technology that may not be ready for production yet.

“We have taken our best and brightest. We have spoken to the best in the industry, and we have spoken to all of the vendors and asked them to give us some of their brightest ideas,” Rubinow explains. “Then we will see what technology is available today and will be available tomorrow. We want the latest and the most effective technology in the data center. And if it means we have to use a bridging technology today until the vendors new technology is ready, so be it.” [Editor’s note: Although Rubinow was happy to discuss the strategy on a high level, he declined to name specifics of the data centers because they are still being built and also because of competitive reasons.]

The two new data centers also will help NYSE Euronext do battle in the ultracompetitive low-latency trading space, according to Rubnow. When it comes to low latency, “It’s not just about the trading systems; it’s also about the container — the data centers — where you find the systems,” he says. “Most of our order flow comes from colocated customers. We want to provide those customers with the best possible speed advantage within the data center.”

The new data centers will offer customers some of the latest and fastest technology available, claims Rubinow. “The data centers will have the design and networking advantages that we have created and will be as fast as the current and future technology will allow us to be,” he says. “We want no bottlenecks in the technology. We won’t rest until all of our customers say, ‘OK, this is fast enough.’ But I don’t know if that day will ever come.

“As long as the marketplace feels that speed is important, and as long as our customers are looking for faster transactions, we are going to be focused on this,” Rubinow continues. “I’ve said this many times: The only limitation is the speed of light.”

Already measured in microseconds, many have questioned when the low-latency arms race will reach its limit. Rubinow doesn’t think it will happen any time soon. “We don’t go to clients and ask them how fast they want us to go, and once we reach their number we get a chance to rest,” he says. “It doesn’t work like that.”

Rather, staying ahead or even with competitors is a large task in this highly competitive market. “Customer advantages with speed are fleeting,” Rubinow admits. “They only last so long before someone else comes along and matches or surpasses them. We are committed — whether it be market data, trading engines, data infrastructure, any component along the way — to making things as fast as they can be. We are always working on finding innovative ways to reduce latency.”