Trading Floor Architecture

Executive Overview
Regulatory pressures

Increased competition in Financial Services industry Market data volume and speed are key factors in Arms Race

Demand for resilient and flexible Trading Architectures which allow quick Service Insertion Guidelines for addressing low latency and high throughput requirements

Order fillers or traders?

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Trading Floor Architecture

2007 Cisco Systems, Inc. All rights reserved.

Cisco Confidential

Industry Challenges
Increasing demand for speed, volume and efficiency Reg NMS and MiFID preparation Algorithmic trading proliferating Trading models changing (i.e.. Dark Pools, Direct Market Access, Black Boxes) Firms offering richer services and exotic instruments (i.e. Derivatives) Business resiliency Service-Oriented Architecture and Web Services adoption

Trading Floor Architecture

2007 Cisco Systems, Inc. All rights reserved.

Cisco Confidential

High-Level Architecture

Ticker Plant, algorithmic trading engines, analytic engines Feed handlers Specialized applications which normalize market feeds before sending to consumers (i.e.. WOMBAT) Publishers and Consumers Trading environments

Market Data - Unidirectional Pricing info via multicast feeds from ECNs and Exchanges Smart Order Routing Carry actual trades by utilizing Financial Information eXchange (FIX) protocol

Trading Floor Architecture

2007 Cisco Systems, Inc. All rights reserved.

Cisco Confidential

High-Level Architecture
Hosted model Messaging Bus middleware (i.e.. Tibco, 29West, Reuters) Latency monitoring Highly available campus trader environment

Latency and Throughput (msgs/sec) are the MOST critical components

Trading Floor Architecture

2007 Cisco Systems, Inc. All rights reserved.

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High-Level Market Data Architecture

HIGH PERFORMANCE COMPUTING Pricing Engine CLUSTER
Feed Handlers Algorithmic Order Trading Mgmt. IP Phone Alerting Trading Systems Execution Monitors

End-User APPLICATIONS
Performance Dashboards

SERVICES

FIX Engine Application Virtualization

Data Virtualization

Messaging Bus

Risk Modeling

Mobile Alerting Storage Virtualization

Compliance Surveillance

OS Virtualization

Latency Monitoring

Quality of Service

RESILIENT MULTICAST NETWORK

Trading Floor Architecture 2007 Cisco Systems, Inc. All rights reserved. Cisco Confidential

Market Data Providers (Exchanges, Market Data Aggregators, ECNs)

Service-Oriented Trading Architecture

Feed Handlers Wombat, RMDS

Ultra-low latency Messaging (Messaging Bus) 29West, TIBCO RV

INFRASTRUCTURE SERVICES

App Security, Virtual Firewall, Anti-X, VPN/SSL, DDoS, NAC, HTTP Inspection Monitor and Analysis

Security Services

AAA, 802.1x, RADIUS and TACACS, ACLs

Identity Services

RDMA, I/O Virtualization, File/Print

Compute Services

VSAN, Data Replication, Remote Backup, Tape Acceleration, File Virtualization

Storage Services

Secure connectivity, Multicast, Quality of service, High Availability

Network Services Campus

INFRASTRUCTURE

Broker/Dealer, Data Aggregator or Exchange

Data Center

Broker/Dealer

Broker/Dealer, Buy Side

Campus Edge (WAN/MAN)

Performance and Latency

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Secure Call Signaling, Call Processing, Presence, E911

Voice and Collaboration Services

Trading Floor Architecture

2007 Cisco Systems, Inc. All rights reserved.

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Monitoring

APPLICATIONS / PARTNERS

Application Virtualization DataSynapse, Platform Computing, Gigaspaces

Pricing Engine

Risk Modeling

Algorithmic Trading

Order Mgmt

Data Virtualization Tangosol, Gemstone, Gigaspaces

Server Virtualization VMWare, Virtuozzo, Sun, Xen

Market Data Infrastructure

Exchange / ECNs Data Feeds (NASDAQ, CBOT, ARCA, CME, INET, BRUT) NASDAQ CBOT INET

ARCA

Order Routing Network (SIAC/SFTI, etc.)

Feed Backbone (Multicast)

Services Core
Analytics and Quantitative Algorithmic Engines Execution Engines

Corporate Core

Feed Handlers (Wombat, TIBCO, 29 West)

Si

Si

Trading Floor Architecture

Broker Data Center

2007 Cisco Systems, Inc. All rights reserved.

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Broker Campus

Traders

Market Data Infrastructure

Hosted Deployment Model
Exchange / ECNs Data Feeds (NASDAQ, CBOT, ARCA, CME, INET, BRUT) NASDAQ CBOT INET

ARCA

ti o ac n s ra T

n s

Order Routing Network

Feed Backbone (Multicast)

Compliance & Risk

Services Core

Corporate Core

Si

Si

Feed Handlers (Wombat, TIBCO, 29 West)

Analytics and Quantitative Algorithmic Engines

Execution Engines

Financial Services Provider Hosting Facility

Trading Floor Architecture 2007 Cisco Systems, Inc. All rights reserved. Cisco Confidential

Broker

Traders

Order Execution Flow Summary

1. Market data is received in the ticker plant. The data stream is formatted, processed, and republished (normalization).

2. Trading applications receive data stream. The data is processed by pricing engines, algorithmic trading engines, and viewed by human beings. 3. An order is triggered, either programmatically by an automated trading engine or initiated by a human trader. 4. The order is sent to the order management system. It is logged and passed to the smart routing engine, which chooses the execution venue based on price, liquidity, latency, volume, transaction cost, etc.
2007 Cisco Systems, Inc. All rights reserved. Cisco Confidential

Trading Floor Architecture

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Order Execution Flow Summary (contd)

5. The order is received by the Exchange FIX engine. An acknowledgement is sent to the initiating firm which gets logged in Order Management System (OMS). The order is sent to a matching application or a market making engine. 6. The market making engine matches sellers to buyers based on published bids and asking price. The seller is matched to a buyer and the order is executed. 7. The Exchange sends confirmation of the execution to the Exchange FIX engine. The Exchange FIX engine sends a confirmation to the brokerage firm. The order is closed.
Trading Floor Architecture 2007 Cisco Systems, Inc. All rights reserved. Cisco Confidential

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Latency Monitoring

Sub-millisecond granularity

Near real-time visibility without adding latency Message vs Network latency Programmatic interface to trading applications Need for Latency Management Architecture

AON/Trading Metrics, IP Service Level Agreement can provide endto-end visibility Microbursts phenomenon
Trading Floor Architecture 2007 Cisco Systems, Inc. All rights reserved.

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Impact of Latency on Proprietary Trades Desk

Bid: 1000 XYZ @ $31.90 Feed Handler Ask: 1000 XYZ @ $31.90 Strategy Engine 120 ms Order Processing Buy: 1000 XYZ @ $31.90 Ask: 1000 XYZ @ $31.90 Strategy Engine 900 ms Order Processing New Price: 1000 XYZ @ $32.10
Source: TradingMetrics, Inc. http://www.tradingmetrics.com/
Trading Floor Architecture 2007 Cisco Systems, Inc. All rights reserved. Cisco Confidential

Bid: 1000 XYZ @ $31.90 Feed Handler

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Latency Management Architecture

Sources of Latency
Application Layer Transaction Layer Network Layer
Application Software (OS, App) Program Trading, Ticker capture, Smart Order Routing, Analytical Application Hardware (CPU, Memory, Storage)

Latency Reduction Solutions

Monitoring
Cisco Application Analysis

MPI, SDP

Direct Market Access

Grid computing, SAN, RDMA, In-Memory Caching Acceleration Appliances FIX Adapted for Streaming (FAST) HW Assisted Multicast Replication QoS Policy Serialization Optimization

Market Data Distribution FIX, Triarch, Tibco/RV, RDMS Security (Firewall, Identity Server, Encryption) TCP/IP Overhead Multicast

Emerging MD platforms HW Assisted Security TCP Optimization

Cisco AON

Trading Metrics Analysis Engine

Security monitoring Cisco Multicast Monitoring IP SLA QoS Policy Mgr.

Cisco Bandwidth Quality Analyzer

Interface Layer

Buffering, serialization, fragmentation Physical Layer (Ethernet, WAN)

CBWFQ, LLQ

InfiniBand, Low-latency Ethernet InfiniBand over WAN, Fiber Optics

RMON

Trading Floor Architecture

2007 Cisco Systems, Inc. All rights reserved.

Cisco Confidential

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Latency Monitoring

IP Service Level Agreement

Deploy IPSLA shadow routers at end points to be measured (such as sever farms, access layers etc.) Use UDP jitter operation
Use router with a real time internal clock (only local accuracy is required); Source(s) and Responder(s) One-way results for jitter (delay variance) Detect and report out-of-sequence and lost packet One-way delay can be measured if clocks are synchronized processing delay is subtracted (Limited to NTP accuracy) If measuring in milliseconds there is greater potential for outliners, so thresholds should be configured accordingly Response times accurate to +- 1 ms Precision around +- 100 s

Reliability

Precision vs Accuracy

IPSLA shadow router Source

Trading Floor Architecture 2007 Cisco Systems, Inc. All rights reserved. Cisco Confidential

IPSLA shadow router Responder

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Layer-7 Microburst Detection

BQM deployed on monitor uplink(s) between Access and Distribution Layers Number of monitored links is dependent on SPAN sessions and interfaces available Layer 7 Microburst detection down to microseconds and analysis to per packet Quality specific bandwidth utilization analysis

KEY BENEFIT - Insight and understanding of network traffic at timescales necessary for electronic trading (i.e. microseconds)
Core

Si

Si

Si

Si

BQM Appliance

Si

Si

Distribution

BQM Appliance
Si

Si

Si

Si

Si

Si

Access

Si

Si

Si

Si

Site A
Trading Floor Architecture 2007 Cisco Systems, Inc. All rights reserved. Cisco Confidential

Site B
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Summary

Competitive market landscape is evolving Trading Floor architectures Business Continuance is a Regulation and Compliance requirement

High Performance and Low Latency are top-of-mind

The Network has to adapt to changing business requirements

Data Center technologies continue to be leveraged

Trading Floor Architecture

2007 Cisco Systems, Inc. All rights reserved.

Cisco Confidential

17

Trading Floor Architecture

2007 Cisco Systems, Inc. All rights reserved.

Cisco Confidential

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