Archipelago Serves Microsoft an Ace

Archipelago is migrating its entire OTC stock-trading business off the Microsoft/Intel platform and onto Sun Microsystems' Unix servers. Sun's track record, coupled with cost savings, security and reliability were key factors in the decision, according to Steve Rubinow, chief technology officer of Chicago-based Archipelago.

"People who have been building these mission-critical businesses in financial services that need to scale and work 24 hours a day and seven days a week, you don't see as many (of them) doing it on a Microsoft platform as there are on a Unix platform," says Rubinow.

Archipelago's acquisition of GlobeNet, a small ECN developing its platform on Sun, contributed to the decision. "It was not time to switch platforms, but rather to keep the momentum going," says Rubinow.

For Archipelago ECN - the nation's second largest ECN after Instinet/Island - to abandon the Microsoft-Intel platform strikes a blow at Microsoft's efforts to penetrate Wall Street's mission-critical trading applications.

Sun's longer track record and its customer base were also factors, says Rubinow. Several electronic markets run on Sun, including the London International Financial Futures and Options Exchange's Liffe Connect, Primex, Instinet and the Chicago Board Options Exchange.

Damon Kovelsky, analyst with Financial Insights, attributes the changeover to becoming an exchange. "The regulatory requirements for exchanges are much more rigorous than an ECN," says Kovelsky. "You have to demonstrate that your systems can handle extreme surges in volumes. ECNs are just broker/dealers as far as regulators are concerned. If they crash, the markets aren't going to self-destruct. If an exchange crashes, you have serious problems," he says.

The migration, which began Feb. 14 and was scheduled for completion on March 31, coincides with Archipelago's transition from an electronic-communications network into an electronic stock exchange. Archipelago Exchange (known as ArcaEx) will trade both New York Stock Exchange and Nasdaq stocks.

The OTC exchange will run on a range of SunFire servers, which operate Solaris 9, including the midrange 4800 server and some smaller machines, says Rubinow. Sun was chosen because Archipelago wants an exchange-trading system that can handle a 300 percent increase in OTC-trading volume.

"They're ambitious in their projections and I think that's right," comments Miranda Mizen, senior analyst with TowerGroup, who notes, "The cost of upgrading later, if (they) reach the peak capacity too soon, is going to be greater," she adds.

Until this change, Archipelago ran it's entire Nasdaq stock-trading business on 1,000 Intel servers, but Rubinow says there are weaknesses in the sprawling NT/Intel (Wintel) architecture. "As you scale and need hundreds of thousands of (servers)," the CTO says, "total cost of ownership (TCO) changes, since the additional servers are not inexpensive, plus there's the overhead of administering them, the need for a larger facility to house them and for additional staff to maintain them," he adds. In addition, Microsoft/Intel lacks a 64-bit architecture, he says.

But Microsoft officials refute those charges. "The TCO from a Microsoft/Intel environment has been documented time and again. It's one of the economic rules of life. We are regarded as probably the cheapest option in that space with the performance and scalability required," says Kenny McBride, Microsoft's global industry manager, Securities & Capital Markets.

Matt Conners, Microsoft's industry manager, financial services, says Archipelago's move is counter to the industry trend. "They're saying, 'We're going to consolidate.' They've just consolidated on big Sun servers. (However,) there's no question that (other) customers are moving away from that to save money. They're considering Linux and Microsoft," he says. Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio