Nasdaq CIO confirms move to open-source Instinet apps

Computerworld - Nasdaq Stock Market Inc.'s CIO said last week that the exchange will scrap its proprietary SuperMontage order entry and execution system in favor of an open-source system from electronic broker Instinet Group Inc., which Nasdaq agreed to acquire last month.

The move to switch systems is a key part of Nasdaq's effort to integrate its technology with that of Instinet and Brut LLC, which it bought from SunGard Data Systems Inc. for $190 million last fall.

Nasdaq CIO Steve Randich said that SuperMontage, which went online two years ago after a three-year, $107 million development effort, is built on Hewlett-Packard Co. NonStop servers and software. Nasdaq has been trying to move away from that proprietary platform in favor of an open-source system with better price/performance, Randich said.

"With the [Instinet] acquisition, we can do it faster in terms of a schedule," he added.

Tom Jordan, CEO of Jordan & Jordan Inc., a New York-based technology consulting firm that specializes in the financial services industry, said Nasdaq is well positioned to integrate the Inet technology from Instinet because of its recent experience merging its systems with Brut's.

Randich said Nasdaq has completed two of the three planned phases for integrating Brut and its order execution system. The logical layers have been integrated, he said, but the task of physically combining systems into Nasdaq's Connecticut data center remains. By the second half of 2006, Randich plans to have taken the trading platforms of Brut and Instinet, both now located in New Jersey, and installed them in Connecticut.

Jordan noted that "anytime you're merging two electronic trading systems, there's some degree of challenge associated with that. I was struck that Nasdaq said it would adopt Instinet's trading platform, whereas [the New York Stock Exchange] said it would continue its hybrid model after acquiring Archipelago."

The NYSE announced the proposed acquisition of electronic communications network Archipelago Holdings Inc. earlier this month.

Randich said his greatest challenge while juggling the technological integration of the three platforms is to convince Brut and Instinet customers that their lives won't change as a result of the acquisitions.

Juggling Protocols

Randich said he plans to keep continuity in the customer-facing order systems by using a single version of the Financial Information Exchange (FIX) protocol, a messaging standard developed specifically for the real-time electronic exchange of securities transactions. All three exchanges will "connect into the target platform, which is Instinet," he said.

Currently, only 20% of Nasdaq's orders come in over the FIX protocol. The remainder go over the proprietary CTCI, or computer-to-computer interface. Instinet uses its homegrown OUCH messaging format. Brut used its proprietary ECN Order API and FIX.