InformationWeek: The Business Value of Technology

Ditmore came onboard to oversee technology for the two online brokerage subsidiaries, Ameritrade and Accutrade, as well as Advanced Clearing, a correspondent clearing business, and Amerivest, a subsidiary that provides brokerage services to banks.

Ditmore had his work cut out for him. Ameritrade's new account acquisitions and average daily trading volumes continued to grow by leaps and bounds. For the first fiscal quarter of 2000, which ended Dec. 31, 1999, Ameritrade added 134,000 core accounts and increased average trade volume to 81,000 trades per day, a 142% increase over the 33,489 it had in the same quarter in 1999 and a 53% increase from the average of 53,100 trades per day it had in the fourth quarter of fiscal 1999.

Within six months, Ditmore had increased capacity by fourfold or fivefold and had increased the throughput capabilities of the systems from about 30,000 trades a day to more than 200,000 trades a day.

In addition to beefing up the transaction-processing capacity, Ditmore had to assess Ameritrade's technology to support the firm's fast-track mission to become the largest retail broker serving individuals and to increase the correspondent clearing business' market share.

At the time, the Omaha, Neb., company had multiple clearing systems and multiple trading systems. With year 2000 remediation and other engineering work under way, Ditmore winnowed the systems down to one strategic trading system and one strategic clearing system. "That, of course, allowed us to focus the resources. We really now feel we've got the best-of-breed systems," he says.

Ditmore stayed with the same technologies that Ameritrade had in place--Unix systems, Oracle database, C and C++ programming languages, and its own proprietary trading and back-office systems, "and just engineered them to perform at the higher level."

As a result of the IT efforts, Ameritrade began to score high in performance ratings as measured by Keynote Systems. According to the Keynote Web Broker Trading Index, for the week of March 13 to 17, Ameritrade ranked sixth with a 10.84-second transaction performance rate, vs. 16 seconds for the overall index of 20 brokers. Keynote's index also showed that Ameritrade had a 94.9% transaction success rate, ranking fifth, vs. the index success rate of 89%.

"We have been steadily improving our performance and transaction success," Ditmore says, noting that Ameritrade moved from ranking in the median to the top 25%.

For eight consecutive weeks ending March 17, Ameritrade also scored among the top five of the 40 major consumer sites that Keynote ranks, with the likes of Yahoo, Lycos, Go.com, and Excite. What's more, Ameritrade is the only online broker in the top five, Ditmore says. Whereas the consumer index measures the response rates of the site's home page, the brokerage measurement actually logs on to the trading site, retrieves a stock quote, requests a stock purchase, and then cancels the buy order.

Dan Todd, director of public services for Keynote, confirms that Ameritrade has been performing better than the broker index since the middle of January. "In the month of December, they did right around the index and a little better than the index."

In Ameritrade's case, the performance of the Web site ripples back to the back-office infrastructure. "Your ability to scale up to handle more volume is only as good as the weakest link in the chain," says Paul Grabscheid, VP of strategic planning at InterSystems Corp., whose Caché e-DBMS is the engine for Ameritrade's back-office system. Caché manages the interactions with clearing firms and banks for the online brokerage firm's daily trading transactions.

Caché also handles all the back-end processing and maintains all 600,000-plus customer accounts and all the trading activity against those accounts, including the sending out of statements, Grabscheid says. "All of the activity related to customer accounts ends up in the database that's built using our software," he says.

Unlike a typical relational database, which stores data in two dimensions--rows and columns--Caché, dubbed a "post-relational database for transaction processing," lets a company organize data in three, four, five, or 20 dimensions, Grabscheid says. In addition, because the database is object-oriented, if a company wants to build a new application in Java, it can store the objects directly in the database. "With a relational database, they'd have to go through some kind of translation to convert the objects into a relational table," Grabscheid says.

Says Ditmore, "The advantage of that technology is that it provides a more object view of the data, which allows us to handle more complex data elements and much more complex sets of data elements, and allows us to more easily execute the clearing and balance calculations that go on in our clearing systems."

As part of a new strategic relationship with InterSystems, disclosed in January, Ameritrade plans to leverage the power of Caché to roll out new products and services. One project is aimed at giving brokers and clearinghouse users access to the back-office system application via a secure intranet. Others include the roll out of real-time account balances and support of international trading for U.S. securities through the back-office system.

Ditmore says Ameritrade will implement real-time account balances by reengineering the technologies it already has. In the international arena, Ameritrade will support international trading by expanding its current offering with Deutsche Bank. "We allow our foreign partners to make U.S. equity trades at better prices. We're expanding that to all of Europe, providing foreign language education and facilities," he adds.

Ditmore will maintain close relationships with a handful of vendors, including data mining company MicroStrategy, BEA Systems, Intersystems, Oracle, Sun Microsystems, and WebLogics. Ameritrade already uses BEA's Tuxedo middleware.

To differentiate itself from competitors, Ditmore says, Ameritrade is going to "provide best-in-class performance." "We're already one of the leaders," he adds, "and that's where we intend to be."