How Linux Mastered Wall Street

When it comes to the fast-moving commercial enterprise of trading stocks, bonds and derivatives, the world's financial exchanges are determination an ally in Linux, at least accordant to one Linux kernel developer practical in that industry.

This calendar week, at the annual LinuxCon conference in Vancouver, Linux kernel subscriber Christoph Lameter will discuss how Linux became wide adopted by financial exchanges, those fast computerized trading posts for stocks, bonds, derivatives and other financial instruments.

As an alternative to traditional Unix, Linux has get on a dominant player in finance, thanks to the operating-system kernel's ability to pass messages very quickly, Lameter said in an interview with IDG. As a matter of fact, the emerging subject field of high-frequency trading (HFT) would not be possible without the ASCII text file OS, he argued. Lameter himself was hired as a consultant aside one exchange — atomic number 2 North Korean won't say which one — based on his work in assembling large-scale Linux clusters.

NYSE Does Linux

The largest change, the Inexperient York Stock Exchange (NYSE) Euronext, is run on a Linux system that can generate 1,500,000 quotes and cognitive operation 250,000 orders every second, offering acknowledgments of to each one transaction within two milliseconds.

Arsenic late as 2007, Wall Street exchanges were still largely keep going Unix, such as Hewlett-Packard's HP-UX, IBM's AIX, and Sun Microsystems' Solaris. O'er the past few years yet, Linux crept into this market, screening up first in ancillary systems and then running a couple of core exchanges.

"The release cycles with Solaris and AIX were very long — two to three years betwixt updates. Linux was able [to build the changes needful] within a month or so," Lameter said.

Financial exchanges need their servers to execute trades as quickly as possible. Even an edge of a few milliseconds could, ended the course of trading billions of dollars a day, provide a competitive edge. This intensity created a hotbed of innovation that couldn't be well encapsulated inside multiyear release cycles, Lameter explained.

"The trading shops saw that the last-latency solutions would exclusively be possible with Linux," Lameter said. "The old Unixes couldn't move as immoral as Linux did."

One key attribute was the TCP/IP smokestack, the configuration of which determines how fast a message behind be passed between two systems. Some other appealing attribute has been a revamped scheduler, which ensures that a operation — one acting a trade for example — isn't interrupted once it has been started. Last, thanks to an Army of volunteer developers, Linux was able to declare oneself drivers for new computer hardware more speedily than the massive Unix vendors.

Flexibility Counts

Linux also offered financial firms the ability to qualify the beginning encipher to further speed performance, Lameter said. "Information technology depends on how dare the interchange is," Lameter said, noting that NASDAQ uses a modified translation of the Gentoo Linux distribution.

Others rightful use off-the-ledge distributions and pay consultants to pull off the settings for maximum performance. Cherry-red Hat Enterprise Linux is now the overriding Linux distribution among exchanges, Lameter said. Red Lid counts among its customers the Chicago Mercantile Exchange, New York Mercantile Exchange, Frankfurt Securities market, Eurex derivative exchange and Philippine Stock market.

A typical architecture of an exchange will comprise of a number of unlike subsystems, Lameter said. One component is a twinned engine, which pairs a seller and a buyer for all trade. The engine captures all the entropy around the trade thus information technology fire be retraced and audited. Specific engines handle specific sets of stocks. An average interchange will have somewhere from 60 to 100 servers handling the matching.

An rally bequeath also have a unmoving of look-close processors, which is the system that the traders connect to. This system will usually consist of 500 to 1000 servers. "The bargainer is not allowed to connect to the matching locomotive itself," Lameter said. Instead, the trader's machine connects to the front-remnant server and the host checks the craft to verify it is possible, then sends instructions for the swap to the matching locomotive. Once the trade is completed, the front-remnant processing system then returns a message to the dealer.

On the software pull, many exchanges still primarily economic consumption software package that was built in-house, using languages such as Java operating theatre C++. Some, however, are migrating toward commercial packages, at least for some tasks such as message passing. Tibco's messaging software and Informatica's 29West are the predominant messaging tools in that space. Many exchanges have also dictated on an future standard for messaging, the Linux-friendly Middleware Agnostic Messaging API (MAMA).

Windows, Eat Linux's Dust

Microsoft has not yet made major inroads to this grocery store, Lameter said. "Windows is mostly relegated to the back office," He same. He claimed that Windows typically has big latent period multiplication than that of Linux, and noted that in 2009, the London Stock Exchange well-tried and abandoned Windows servers.

Microsoft declined to discuss the London Ancestry Interchange, though a spokesperson did note that information technology has plenty of customers in the financial services diligence, such as Thomson Reuters and KAS Bank. Microsoft also cited a 2010 IDC study that showed that, world-wide, Microsoft enjoyed 74.7 percent of the server market, while Linux captured only 21.4 per centum of the market.

Joab Jackson covers enterprise software and miscellaneous technology break newsworthiness for The IDG Newsworthiness Service. Follow Joab on Twitter at @Joab_Jackson. Joab's e-mail address is Joab_Jackson@idg.com