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Exchanges Embrace Open Source

As open source software matures, exchanges increasingly are embracing the transparency and efficiency that the solutions offer.

A growing number of stock exchanges are leveraging open source solutions, with the aim of shaving time off transactions, increasing efficiency and cutting costs. One company that is taking advantage of the trend and has partnered with a number of exchanges is Red Hat, the open source technology solutions provider.

Among the exchanges adopting open source solutions are NYSE Euronext, CME Group and the Tokyo Stock Exchange (TSE). NYSE Euronext recently standardized on Red Hat's JBoss Enterprise Middleware platform, which delivers open source middleware for application and service hosting, business rules management, content aggregation, data federation, and service integration. CME Group migrated from a proprietary Unix platform to a Red Hat Linux alternative. And the TSE selected Red Hat Enterprise Linux as its standard operating platform for its next-generation "arrowhead" trading platform with the aim of building a trading system that combines low latency and reliability and can accommodate changes within a short time window, according to the exchange.

For NYSE, the move from proprietary application servers to an open source reference architecture was driven by the need to integrate disparate and legacy proprietary infrastructure on a single platform that would simplify its application development, deployment and management processes, says Brian Stevens, CTO and VP of worldwide engineering at Raleigh, N.C.-based Red Hat. The exchange, Stevens notes, was operating a disparate set of tools that required different expertise.

Before migrating to JBoss, the exchange "did a pilot in the regulatory area," reports Brian Clark, chief software architect for NYSE Euronext. "It offered more simplified architecture - it was easier to deploy and maintain. There wasn't a lot of complexity for users."

NYSE, which already was running mission-critical applications on Red Hat Enterprise Linux, now uses JBoss in its operational data store application for the trading floor that captures trades and orders in real time, as well as in the back office, for billing, for configuration management, for reference data and on its external websites, including nyx.com and nysedata.com, Clark relates. The platform, he adds, also provides a middle tier for NYSE's business analysts to monitor the market through the organization's Stockwatch application, which connects to NYSE's trading systems, provides real-time surveillance and handles 100,000 trade messages per second. Further, NYSE uses JBoss to create tools for operations, enabling the exchange's development team to quickly deploy applications to production and save manual intervention on systems, NYSE says.

"What I like about open source is that it allows us to run mission-critical solutions and offers collaboration and peer review," Clark comments. "When you see something you need done, and you have time, you can do something about it." Ultimately, he says, the move to open source enabled NYSE to shave 60 percent off of its costs.

Community Support

For CME Group, too, one of the biggest benefits of open source technology is being able to quickly resolve issues by drawing on the open source community, according to Vinod Kutty, associate director, CME Group. "With proprietary software, even if you're not modifying code, you have to wait for a vendor to come back and tell you what's going wrong," he says. "With open source, there is a large community that can give you information on bugs and how to resolve them."

CME migrated from the Sun Solaris operating system running on SPARC servers to Red Hat Enterprise Linux running on x86-based servers after deciding that Linux would provide cost, performance and reliability benefits, Kutty reports. "We were looking for better performance at a lower cost," he explains. "The benefits to us stem from the fact that we are advanced users - we like to get in under the hood. We've worked with Red Hat so our engineers could work on the code at the same time as Red Hat."

Security is not a particular concern with open source solutions, Kutty remarks. "I feel more comfortable knowing what's in the product I'm getting," he comments. "The other alternative is the security model where you trust the vendor and have no visibility of what's under the hood. Every software solution has bugs. You can't say one is better quality than another. But from a risk perspective, I'd rather look at the code and say, 'This is what we think is happening.' "

Further, there is no real incentive for a proprietary vendor to immediately tell clients about bugs, Kutty suggests. "With open source, there is a big enough community around a solution for problems to be exposed very quickly," he notes. "And you don't have to fear conflict of interest."

The benefits of open source technology notwithstanding, "CME Group looks at solutions from a functionality perspective, before deciding whether to use an open source model," Kutty underlines. "Still, as the industry matures, we'll be seeing more and more open source alternatives."

Melanie Rodier has worked as a print and broadcast journalist for over 10 years, covering business and finance, general news, and film trade news. Prior to joining Wall Street & Technology in April 2007, Melanie lived in Paris, where she worked for the International Herald ... View Full Bio

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