Tuesday, August 28, 2012

Why Success Greets NYSE Euronext's Community Platform for Capital Markets Cloud

Transcript of a BriefingsDirect podcast from the 2012 VMworld Conference focusing on applying the cloud model to providing a range of services to the financial industry.

Listen to the podcast. Find it on iTunes/iPod. Download the transcript. Sponsor: VMware.

Get the latest announcements about VMware's cloud strategy and solutions by tuning into VMware NOW, the new online destination for breaking news, product announcements, videos, and demos at: http://vmware.com/go/now.

Dana Gardner: Hello, and welcome to a special BriefingsDirect podcast series coming to you from the 2012 VMworld Conference in San Francisco. We're here the week of August 27 to explore the latest in cloud computing and software-defined datacenter infrastructure developments.

I'm Dana Gardner, Principal Analyst at Interarbor Solutions, and I'll be your host throughout this series of VMware sponsored BriefingsDirect discussions.

It has been a full year since we first spoke to NYSE Euronext at the last VMworld Conference. We heard then about their Capital Markets Community Platform of vertical industry services cloud targeting the needs of Wall Street IT leaders.

As an early adopter of innovative cloud delivery and a groundbreaking cloud business model, we decided to go back and see how things have progressed at NYSE. We will learn now, a year on, how NYSE's specialized cloud offerings have matured, how the business of the financial services industry has received them, and explore how providing cloud services as a business has evolved.

We're joined by Feargal O'Sullivan, the Global Head of Alliances at NYSE Technologies. Welcome to BriefingsDirect, Feargal. [Disclosure: VMware is a sponsor of BriefingsDirect podcasts.]

Feargal O'Sullivan: Thank you very much, Dana. Nice to be here.

Gardner: Tell me how it's going. The Capital Markets Community Platform, as we discussed, is a set of cloud services that you're providing to other IT organizations to help them better support their companies and their customers. How have things progressed over the past year?

O'Sullivan: We've been very happy with the progress we've made over the past year. When we announced at VMworld last year, we had just gone into early access for our first clients in our data center in the New York, New Jersey, Connecticut tri-state area, where we have all of our US-based markets running the New York Stock Exchange Markets, the Arca Electronic Markets, and AMEX.

That has since gone into production, has a number of clients on it, is being perceived very well by the community, and is really driving as a lynchpin of our strategy of building a global capital markets community.

Since the success of that, we've actually progressed further, to the point of having deployed the same environment in a second data center that we own and run just outside of London, in a town called Basildon, which is where we run all of our European markets, the Euronext side of NYSE Euronext.

We now have an equivalent VMware-based cloud environment and a range of ancillary services for the capital markets industry available in that location. Clients can now access, as a service, both infrastructure and platform capabilities in both of those facilities.

Furthermore, we've extended to two other financial centers in the world, one in Toronto and one in Tokyo. That's a slightly more stripped-down version of the community platform, but it's very useful for clients who are really expanding the business and gone globally.

Four locations

Now, we have those four locations up and running in production with production clients, so we are very happy with that progress.

Gardner: That's very impressive growth. In order to move this set of capabilities across these different geographies and in the data centers that you have created or acquired there has the whole software-defined datacenter model helped? I would think that in the older days -- 10 or 15 years ago with individually supported applications on individual stacks of hardware and storage -- that that would have been a far more difficult expansion project.

So what is it about the way that we're doing things now in the modern data center that's allowed you to build out so quickly?

O'Sullivan: Clearly, the technology has advanced significantly from the old days. The capability around virtualization on the the hardware server level with the VMware Hypervisors, and in particular the vCloud service, gives clients their own control over their environment.

Also on the networking side, it's become much more viable for clients to actually deploy into shared environment, still maintaining confidence that they're going to get both the security profile that they're looking for, as well as the performance capability.

We use the EMC VNX array with the FAST Cache capability to give a very stable performance profile based on demand. It allows different workloads, and yet each gets very good performance and response time. So there are many components along the way. Also, management and monitoring of these types of infrastructures have improved.

Our clients have certainly seen that enhancement in the technology. The financial services industry is unique in the way it leverages technology on two aspects.

One, security profile is absolutely critical. Security isn't just around customer data, but around application development and tools of the trade, intellectual property that firms might have, trading strategies, different analysis, analytics, and other types of components that they develop and build,. They feel they're highly proprietary in nature and don't want to allow anybody to get access to them. So they place security extremely high on the list.

The other unique aspect is performance aspect. It's a slightly different performance model from your typical sort of three-tier web store type of environment. Financial services, first of all, push very high volumes of content through their applications. They need to do so in microseconds, or at least milliseconds, of response time and latency measurements, and they also most importantly need to do so predictably.

With a big batch job of some kind, say a genetic folding job, you drop off a job, go away for 12 hours, and you come back. A little bit of clearly inefficient processing time is not great, because that drags out the whole thing over time, but there is no sort of critical "need it here," "need it now" requirement. So latency spikes are less of a problem.

Latency spikes

But in our industry, latency spikes are a real problem. People look for predictive latency, so we had to make sure that we applied a very tight security profile to our cloud, and a very high performance profile as well.

Gardner: So as you've expanded across different market regions and brought this into more of your portfolio for more of your customers, have you also increased the services? Last time, we talked about some services that were very impressive, but how have you been able to build on this cloud in terms of those value-added services that you deliver specifically to a financial clientele?

O'Sullivan: That's why we built our cloud, because there are many service providers who offer very valuable cloud capabilities that are based on core infrastructure and core computing capabilities, and they do so very well. However, we consider ourselves a vertical industry community. We're specifically focused on capital markets participants. We try to support and make it cheaper, more cost-effective, and more readily accessible to a wider range of participants to be able to get access to the markets.

So in our cloud and our community, we provide a range of platform and services that we have added. The core is "Come into our vCloud Director environment and access your compute infrastructure." By the way, we have a Compute On Demand Virtual Edition, we also have a Compute On Demand Physical Edition for those cases where that latency issue is of the utmost importance.

Then, we provide clients with the value-added features that we know they need, because they're in the capital markets business. The key one is market data. This is something that is absolutely critical in financial services, because every trade, no matter what you are buying or selling, always starts with a quote. Even if you walk into the shop and you ask how much it would it be for a can of soda, they say it's $1 or $1.20, whatever it is, and then you decide if you want to buy.

So in the financial services industry market data is the starting point, the driver of all the business. And the volumes on this, the sheer size of the content that comes down, is really outstanding. It's at the point now that even if you were to just subscribe to all North American equities and options, you'd need a 10-gigabit Ethernet pipe, and at points during the day, you're probably using upwards of 8 gigabits of that pipe just to get all that content.

Obviously, we can provide raw content, but we've added a range of services into our cloud and into the community. We can say, "We can offer you a nice filtered market data feed, where you just present us with the list of instruments you want, and we can add value-added calculations, do analytics, and provide that to you."

We've also developed an historical market-data access service. So if you want to go back and test your strategies against previous days of trading, back for many, many years, we have a database that's deployed in the cloud. So you can query the database, load it into your virtual environment, and analyze and back-test your strategies.

We've added order-routing capabilities, so when you are ready to send your orders to the market, if you are a market maker yourself, you might go direct to our gateway. If you're a sponsored participant, you might go through our risk-managed gateway, which would be sponsored by a broker.

Or if you are just a regular buy-side firm, a money manager, you might use our routing network and ask us to write your orders to the different brokers or the different markets, and we can handle that. Those are either ends of the trade.

Get the latest announcements about VMware's cloud strategy and solutions by tuning into VMware NOW, the new online destination for breaking news, product announcements, videos, and demos at: http://vmware.com/go/now.

Integration pieces

On Thursday, Aug. 30, I'm going to be presenting with VMware and EMC in one of the breakout sessions about us moving up the stack to start offering more of the integration pieces of this. We're using the Spring environment and a range of other VMware tools, GemFire, and so on, to demonstrate a full trading system deployed in the virtual environment with the integration tools -- all running hosted in our environment.

It's more of a framework that we're showing, but it provides platform as a service (PaaS), not just the market data in, which is our specialty, and the order routing out. Once you're within your environment, the range of additional tools makes it easy for you to develop and customize your own trading tools and your own trading strategies. That's something I will be talking about on Thursday.

Gardner: That's very interesting. It appears that what you've done here with your intermediary cloud is developed a fit-for-purpose value to such things as data services. Then, you've applied that to other value services like order services and now even integration services.

I think it's a harbinger of what we should expect in many other industries. Rather than a fire hose of either services or data, picking and choosing and letting an intermediary like yourselves provide that with the value-add, seems to be more efficient and valuable.

Looking at this as a value proposition, how has this been going as a business? Have you been enjoying uptake? I know you can't go into too much detail, but has the reception in the market satisfied your initial or hopeful business requirements around this as a business, as a profit and loss center?

O'Sullivan: The good news is that we've definitely had great progress here. We have a number of clients in all of the locations I mentioned. We're continuing to grow. It's a tough environment, as you can imagine, both just in the general economy and in particular in the financial services industry. So we expect to continue to grow this significantly further.

We have been certainly very happy with the uptake so far. We knew that we were going out well ahead of everybody else and we were very keen to do so, because we see and understand the vision that VMware and EMC in particular have been promoting over the past few years. We agree with it fully. We feel like we're uniquely positioned within the capital markets industry as the neutral party.

Remember, we're just a place where people go to trade. We don't decide what you buy or what you sell or how much it should be. We just provide the facility, the rules, and the oversight to ensure an orderly market. We wanted to make it easier and more cost-effective for firms to get access to that environment.

So by providing all of this capability, we think we're in a fantastic position now, that as more and more firms continue to explore virtualization and outsourcing of non-business critical functions, which for a while used to be running on your own servers, but which are now nothing but overhead.

We see them moving more and more into the cloud. We expect over the next two or three years, that this is really going to explode. We intend to be there, established, fully in production, tried and tested, and leading the industry from the front, as we think we should be with the a name like the New York Stock Exchange.

Well-known brand

That’s a brand that's so well-known globally. It's the best place to trade. It's the most reliable and most secure place to trade stocks, with the best oversight, and we want to apply that model to all of the services that we offer our clients.

Gardner: Let's drill just a little bit down into the notion of being able to add on these services, whether it's integration orders or data services. Is there something particular about the architecture that you've adopted that allows you to progress into these newer areas, maybe even in the future delivering feeds through a different format, satisfying needs around mobile devices, say HTML5.

I'm not focused so much on the application that you will be pursuing, but the ability to pursue more applications without necessarily a whole lot of additional infrastructure investment. How does that work?

O'Sullivan: The key for us was that we developed and built our own data center, which we operate and manage. It's a unique environment in Mahwah, New Jersey. We also built and developed our own in Basildon, just outside London. Those two facilities were built as Tier-4 guided data centers to the highest standards of reliability and security. Every time I go there, I'm amazed at the level of attention, the attention to detail that our engineers put into designing it to handle all sorts of occurrences.

The reason is that there is so much content created in these facilities. Traders gravitate towards liquidity, and we're a source of liquidity. We're probably the single biggest equity and options venue in North America, so traders are attracted to be there.

Given the electronic nature of the market, forgetting about high frequency trading, everything is electronic. So rather than take applications and deploy them in Timbuktu or wherever you choose to deploy your application, somewhere away from this facility and pay the expense of wide area network connections and so on, it makes more sense to deploy your applications close to the content that you care about.

If there is 8 gigabit bursts of market data on the network, why would you try to bring that 50 miles away to your own office? Why not take the applications that process that data and deploy them in there? With that sort of thought process in mind, we continue to build out a range of value-added services that we think clients would require.

We're also well aware that our main purpose in life is to be this neutral venue that creates markets and allows people to come and trade. So we're never going to be the best person, the best firm, or the best vendor at developing every possible requirement that every particular capital market’s participant might need. That's where our Global Alliance Program comes in.

I've been focused on working on our partnerships and ensuring that, as clients deploy into the cloud and they need market data, routing, risk management, back-office processing, and historical analysis. They also need different types of analytics, and they might need other services like email archiving and storage. They need to comply with regulation and so they need regulatory reporting services.

Not generic

There is such a wide range of capabilities required that are very specific. They're not generic. You're not going to go to some telco provider’s cloud and have all these firms that can offer you all these services there. There needs to be enough potential clients before a vendor is going to want to deploy their applications in this environment.

So we're building this community. We're basically saying that we have over 2,000 firms connected to our network, hundreds in our data centers. We have a wide range of vendors and we're continually working to add more so that it can offer services to those firms.

You can use our infrastructure, our cloud, and some of the integration capability that we've developed, both ourselves and through our relationships with vendors like VMware and EMC, to add on these capabilities that the firms are going to need and make a one-stop shop, a community, a place where you can go to get all the applications needed, similar to the app store model.

Gardner: You've defined what we should expect for public-cloud services. There is some thinking in the marketplace that there will be two or three public cloud providers, and everyone will go there, but I really think you have defined it by having a community close to their customers, recognizing that the architecture and the association with data and the integration is essential. Then, that value-add for applications and services on top of that means an ecosystem of cloud providers and not just a handful. So I really think you've painted the picture of the true future on cloud.

O'Sullivan: Thank you. We certainly see it that way. Our clients have taken us up on it already. While we still think it's early days, we're confident that we're going in the right direction, and that this will definitely, definitely take off in a big way, and within five years we will be looking back at how quaint this conversation was.

Gardner: I really enjoyed speaking with you, Feargal. We have been talking about the success of specialized vertical industry cloud delivery models and how they are changing the IT game in such mission critical industries as financial services.

I would like to thank our guest, Feargal O'Sullivan, the Global Head of Alliances at NYSE Technologies. Thank you, sir.

O'Sullivan: Thank you very much, Dana. I really appreciate the time to speak with you.

Gardner: And I also thank our audience for joining this special podcast coming to you from the 2012 VMworld Conference in San Francisco. I'm Dana Gardner, Principal Analyst at Interarbor Solutions, your host throughout this series of podcast discussions. Thanks again for listening and come back next time.

Get the latest announcements about VMware's cloud strategy and solutions by tuning into VMware NOW, the new online destination for breaking news, product announcements, videos, and demos at: http://vmware.com/go/now.

Listen to the podcast. Find it on iTunes/iPod. Download the transcript. Sponsor: VMware.

Transcript of a BriefingsDirect podcast from the 2012 VMworld Conference focusing on applying the cloud model to providing a range of services to the financial industry. Copyright Interarbor Solutions, LLC, 2005-2012. All rights reserved.

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