For Rent: NYSE Cloud Power From N.J. Fortress
Mahwah, N.J., data center will offer infrastructure-as-a-service to traders outside licensed New York Stock Exchange membership, starting in the third quarter.
Several clients are using the infrastructure as a service (IaaS) at this stage. However, just two of them are willing to be named. Millennium Partners and Pico Quantitative, who were mentioned when plans for the service were first announced last summer.
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In addition, NYSE technologies is planning the launch of its Global Alliance Program in the third quarter, which will bring vendors of third-party analytical applications and trading systems into the Mahwah facility to work with NYSE Technologies trading systems and matching engine, O’Sullivan said. NYSE Technologies is also bent on bringing in over-the-counter, hedge fund, index fund, and other trading services, which would operate under an existing NYSE sponsor’s license to create a richer electronic trading ecosystem.
O'Sullivan, who is NYSE Technologies' global head of alliances, is targeting any trading company seeking access to a first-class matching engine, high-speed information access and trades, and competitive rates. With hundreds of new hedge funds, index funds, exchange-traded funds, and other trading instruments created each year, he doesn't lack for prospects.
With the new 400,000-square-foot Mahwah facility, "we've got the place to bring in other providers of services, to have a community. We're trying to build the network effect," where the value of the NYSE exchange increases with its growing number of participants. NYSE has dubbed its IaaS offering the Capital Markets Community Platform. O'Sullivan refuses to call it a data center; it's a "liquidity center," he said in an interview.
[ Want to learn more about how the new NYSE "liquidity center" has the potential to change the financial industry? See Cloud Plays Disruptive Role In Financial Services. ]
To keep its exchange a world focal point, NYSE Technologies needs to generate a wider trading community that both relies on NYSE's centralized data, and generates the trading that allows NYSE to continue to produce market-leading information.
The fortress-like Mahwah site is able to withstand 220 mph winds and a power grid outage. It's served by two electricity supplies and also has its own generators onsite. It opened last June, occupied by NYSE licensees that placed their own equipment in its colocation facilities. But there was another section, where racks of x86 servers running VMware virtualization software will supply IaaS to companies that are not exchange members. Traders who wish to avoid the latency induced by virtualization will be able to run on bare-metal servers.
In addition to offering its trading technology services, NYSE possesses a trove of historical market data and analysis, available as data services. Having a close proximity with a low latency level to the data in those services is desirable to firms that derive a trading strategy based on them.
New SEC regulations, based on the structure specified by Congress in the National Market System, require an exchange to be able to the check for the lowest price of an equity, whether on its own or some other exchange, and then match the buyer to that low-priced seller. A similar directive in Europe, the Markets in Financial Instruments Directive, placed a similar requirement on the European side of NYSE Euronext. The more trading going on inside NYSE's doors, the faster informed its systems will be and the more it will know about the context of the trades, said O'Sullivan.
NYSE is requiring IaaS prospects to rent a minimal presence that is far larger than the minimal server in the Amazon Web Services Elastic Compute Cloud or Rackspace Cloud. For example, they must contract for 96 GB of RAM and agree to run no less than 8 GB of that RAM with each virtual machine. That minimum ensures each VM has its own core, and is thus less likely to encounter contention for CPU cycles or give the Capital Markets Community Platform a reputation for imposing latencies on trading.
That virtual server size in Amazon's EC2 or Rackspace Cloud would be labeled a "large" instance; NYSE isn't trying to match the Amazon and Rackspace entry-level server sizes, such as micro, small, and medium server.
Customers who choose a virtualized, multi-tenant architecture in the NYSE infrastructure will experience slight latency but also the lowest costs. One piece of hardware can run several such virtual machines, spreading the cost.