Direct Edge has selected a trio of high-speed offerings from technology vendors Microsoft and Informatica to support its trading platforms, reducing latency and enabling the US exchange to make substantial cost savings.
Microsoft's Windows Server 2008 R2 and SQL Server 2008, and Informatica's Ultra Messaging were chosen by Direct Edge to enable substantially increased trading volumes and gain a competitive advantage from ultra-low latency capabilities.
Founded as an electronic communications network in 2005, Direct Edge converted to a fully-fledged stock exchange in summer 2010. With a market share of between 9 and 11% of all trading volume in US equities, the firm is currently engaged in fierce competition with rival exchange BATS to be the third largest US stock exchange, after the New York Stock Exchange and Nasdaq OMX respectively.
“When we put our stock exchange on the Microsoft platform, our number one goal was to achieve latency low enough to compete against the biggest exchanges in the country,” said Steve Bonanno, chief technology officer at Direct Edge.
The firm claims the new technology upgrades have already helped increase its market share, thanks to improved capabilities including an 83% reduction in latency to 340 microseconds, and a 580% increase in throughput.
Moreover, Direct Edge has saved between US$3.5 million and US$5 million in reduced operating costs by bringing the current platform to market a year sooner than planned. The firm estimates it has saved another US$11 million from a 25% smaller hardware footprint together with the one-year differential in costs related to clearing transactions.
Direct Edge is also using Informatica Ultra Messaging to develop a peer-to-peer design for efficient communications between applications within the exchange platform and eliminate message components susceptible to failure – a plan that will increase reliability and further cut costs.
“To achieve the execution excellence required by today's high-velocity capital markets, companies such as Direct Edge will need to be continually focused on reducing costs while they deliver superior service because many customers regard financial services firms that cannot differentiate as interchangeable,” commented Colleen Healy, industry general manager, Microsoft.
Direct Edge recently launched a suite of connectivity services that provide market data feeds and direct market access to all major US exchanges via firms' Direct Edge connections, in November 2010.