This article originally appeared in Investor's Business Daily
Tuesday, August 28, 2001
By Doug Tsuruoka
Investor's Business Daily
Will Linux be Wall Street's next killer app?
IBM Corp. (IBM) plans to announce Tuesday that the electronic trading service that supplies brokers with data from the New York and American stock exchanges is shifting its key applications to Linux.
The big move is being made by the Securities Industry Automation Corp., or SIAC, and a related unit, Sector Inc.
SIAC runs the NYSE's and Amex's computer trading and messaging systems. It supplies brokers and member firms with constant streams of data on buy and sell transactions. The system handles about 4 to 5 billion trades daily from the exchanges.
In related news, IBM also plans to announce Tuesday it's helping financial software provider Javelin Technologies offer Linux-based trading applications to hundreds of institutional clients.
The idea behind Big Blue's foray is to give financial clients cheaper and more efficient trading systems based on Linux technology. Many customers, especially small fund managers, can't afford big ticket trading networks that large institutions like banks can afford. Linux-based systems tend to be cheaper, providing a fall back.
Linux's strong debut on Wall Street is giving the software its biggest boost so far. Numbers of large companies and universities over the last two years have shifted their computer systems to the software developed by Finnish programing whiz Linus Torvalds.
But the NYSE and Javelin deals may give Linux a hot new beachhead with financial institutions.
Ready For The Mainstream
"Stock trades are one of the most sensitive, secure and important kinds of transactions that exist," said John Patrick, vice president of Internet technology at IBM. "This deal has removed any doubt that Linux is ready for the mainstream and that it can play a major role in electronic businesses of all kinds and sizes."
Patrick says a strong point of Linux software is that data on a stock transaction is relayed from one party to another without interference.
Linux is an open-source software operating system, meaning its basic code is available free to anyone. It competes with nonopen source operating software such as versions of Unix and Microsoft Corp.'s (MSFT) Windows.
SIAC is shifting to Linux with hardware, software and services support from Big Blue.
IBM is pushing Linux because it believes customers prefer it as a cheaper and more flexible operating system over proprietary software like Unix, which requires users to pay licensing fees. As part of its campaign, the world's biggest computer maker is spending $1 billion over the next several years to popularize Linux with big clients in the financial, manufacturing and other industries.
IBM declined to put a value on the SIAC deal, but analysts said it totals in the millions of dollars.
Though basic Linux software is free, IBM makes money by selling the middleware that links Linux with existing software and computer systems at places like SIAC. It also makes money by selling Linux servers and services for Linux-based systems.
SIAC quietly started switching its so-called Artmail trading applications to Linux in July. It plans to finish the job by year's end.
Artmail works like an electronic gear box that forwards messages on buy and sell transactions to brokers and NYSE member firms.
SIAC's Artmail applications previously ran on Sun Microsystems Inc. (SUNW) servers that used Unix. But they will now run on IBM Linux servers linked to an IBM mainframe system.
Patrick says the Linux financial software used by SIAC and Javelin includes security features that protect financial transactions from tampering.
The security offerings include new Linux-based Tivoli security management software from IBM. The software has services like Tivoli policy director and Tivoli security manager that let clients enforce security policies within their electronic business systems.
"Linux security is critical to customers, particularly in the financial sector. It's no coincidence that as Linux matures and becomes more secure, the sector is beginning to adopt the platform for critical transactions," said Steve Solazzo, IBM's vice president for Linux, in a statement.
Jerry Graham, SIAC's director of virtual machines, and Linux say the financial services provider was drawn to Linux because of its ability to consolidate workloads efficiently. "The (Linux system) offers users the ability to crawl onto the reliability and shared resources of the IBM mainframe," Graham.
Graham says SIAC converted to Linux quickly because of the software's open, flexible nature. "We were able to port our Artmail application in about two-and-a-half days," Graham said.
Javelin says it teamed up with IBM for Linux because it wanted to provide clients with cheaper electronic trading technology. It's now ready to market Linux-based software technology that works with IBM servers that link Javelin's 250 institutional clients with smaller fund managers and hedge funds.
Such smaller funds don't always have the money to buy expensive electronic trading systems that link them with clients. They are expected to find Javelin's new Linux-based systems more affordable.
"All this shows Linux is really gaining a head of steam. That it's really gaining confidence in key quarters like Wall Street," Patrick said.