Case Study: NYSE trades without wires

The New York Stock Exchange's TradeWorks system, developed with IBM, lets brokers on the trading floor place orders and communicate market information from the point of sale to institutional investors.

NYSE decided to modernise its processing system to keep up with escalating trading and messaging volumes without having to increase headcount, said Roger Burkhardt, chief technology officer at NYSE, when TradeWorks was announced last year,

"Part of the role of technology at the New York Stock Exchange is to allow us to handle ever-increasing volumes with same number of people," Burkhardt said. "We have the same number of people trading today, doing 1.4 billion shares, as did 16 million shares 30 years ago."

Growing volumes of traffic and messages
Along with 60% to 80% compound annual growth rate in share volume, NYSE has had to deal with an even greater surge in messaging traffic. Brokers today collectively send and receive an average of 75,000 messages a day - up 500 percent over the last four years, Burkhardt said.

In looking at the performance of NYSE's existing wireless handheld system over the last few years, NYSE found "we were being embarrassed by our own success," Burkhardt said.

"The brokers were taking up the system very quickly, they wanted more and more capability on their handhelds, and they wanted the ability to handle many more messages, many more orders, and really to multitask a lot better."

The new system will provide a much faster wireless network and allow brokers to deal with customers more effectively, Burkhardt said. "It's about throughput and productivity."

Buying, not building
The Securities Industry Automation Corporation (SIAC) - NYSE's technology partner that develops and operates its computer and communications networks - chose IBM to lay the infrastructure for the NYSE's TradeWorks system.

It was a new tactic for NYSE, which in the past has built its own custom systems. "Historically we have often built our own middleware. We got into electronic trading 30 years ago when middleware could not be bought," Burkhardt said. "Going forward we want to get out of that business."

The deal with IBM includes the purchase of 3,000 handheld devices custom-designed by Big Blue for NYSE. Brokers on the trading floor will use the handheld devices - which run a lightweight version of Windows - to link to a wireless network where they buy and sell.

Behind the scenes, the new processing system runs on IBM middleware. WebSphere application server software running on HP servers will provide transactional capabilities, and DB2 data management software running on an IBM zSeries mainframe will store NYSE transactions related to broker-initiated trades.

IBM also is supplying Linux-based workstations which traders, brokers and clerks will use to relay real-time market intelligence from the NYSE floor to upstairs trading desks.

In the big picture, the TradeWorks order-processing system will serve as a building block for the NYSE's proposed "hybrid market" initiative to weave more automated trading processes into the exchange.