How Linux Mastered Wall Street

As late as 2007, Wall Street exchanges were still largely run on Unix, such as Hewlett-Packard's HP-UX, IBM's AIX, and Sun Microsystems' Solaris. Over the past few years however, Linux crept into this market, showing up first in ancillary systems and then running a few core exchanges.

"The release cycles with Solaris and AIX were very long -- two to three years between updates. Linux was able [to make the changes needed] 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, over the course of trading billions of dollars a day, provide a competitive edge. This intensity created a hotbed of innovation that couldn't be easily encapsulated within multiyear release cycles, Lameter explained.

"The trading shops saw that the lowest-latency solutions would only be possible with Linux," Lameter said. "The older Unixes couldn't move as fast as Linux did."

One key attribute was the TCP/IP stack, the configuration of which determines how fast a message can be passed between two systems. Another appealing attribute has been a revamped scheduler, which ensures that a process -- one performing a trade for example -- isn't interrupted once it has been started. Lastly, thanks to an army of volunteer developers, Linux was able to offer drivers for new hardware more quickly than the large Unix vendors.

Flexibility Counts
Linux also offered financial firms the ability to modify the source code to further speed performance, Lameter said. "It depends on how daring the exchange is," Lameter said, noting that NASDAQ uses a modified version of the Gentoo Linux distribution.

Others just use off-the-shelf distributions and pay consultants to tweak the settings for maximum performance. Red Hat Enterprise Linux is now the dominant Linux distribution among exchanges, Lameter said. Red Hat counts among its customers the Chicago Mercantile Exchange, New York Mercantile Exchange, Frankfurt Stock Exchange, Eurex derivative exchange and Philippine Stock Exchange.
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On the software side, many exchanges still primarily use software that was built in-house, using languages such as Java or 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 this space. Many exchanges have also settled on an emerging standard for messaging, the Linux-friendly Middleware Agnostic Messaging API (MAMA).
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