Exchange Finds Trading Growth and Compliance Solution

The Chicago Mercantile Exchange is undergoing an unprecedented growth period, with the volume of trading doubling every year since Sept. 11, 2001. The exchange handles commodity futures (for example, live cattle and lumber), foreign exchange (such as the euro and the peso), equity index funds (like Nasdaq and the S&P 500) and one of the largest futures products in the world, the Eurodollar short-term interest rate contract.

All together, the CME handles nearly 3.7 million contracts at a notional value of nearly $4 trillion every day.

Why such a boom in futures? According to the CME, more and more people have been learning about derivatives, aka futures.

In addition, the CME has undergone a hub-based expansion to a handful of European markets, giving foreign traders direct access to their marketplace, which simply wasnt available before.

Click here to read about how the CME enhanced handheld trading.

The combination of increased education, volatility and international expansion have contributed to the CMEs dramatic trading increase, said Allan Schoenberg, associate director of corporate communications at the CME.

To deal with the tremendous upswing, the CME had to increase capacity. Such an overhaul was going to require a massive networking restructure and the need to revisit how the CME stores and backs up all its trades and communications.

The exchange took a twofold approach to rebuilding. It relegated networking duties to the expertise and quality assurance efforts of its internal staff. For storage and redundancy, it turned to an integrator the exchange had trusted since 1998.

Given the in-house expertise and the intimate knowledge of every hop on the network, the internal teams took on the responsibility for improving speed, thereby increasing capacity. The six teams analyzed every step of the trading process and looked for where they could trim the fat: a few milliseconds here, a few milliseconds there.

"Things that were done in the beginning because it was the most robust way to do it—we found other ways of keeping robustness but doing it quicker," said CMEs director of distributed computing, Joe Panfil.

The biggest improvements came in the restructuring of the CMEs architecture, Panfil said. For example, Panfils teams would look at the inbound path of an order before it reaches the matching engine. Theyd notice that it might be currently touching five servers. Theyd ask themselves, "How can we get it so it only touches two servers before it hits the engine?"

Other improvements included upgrading Cisco Systems Inc. 5500 switches to 6500s, optimizing applications, continually upgrading the Tandem match engine and a massive conversion to Linux, Panfil said.

The last step was to split interfaces on individual server boxes where appropriate. Instead of having a box do double duty by pushing and pulling data, Panfil said, the teams would split interfaces by dedicating one box to sending data and another to receiving data.

Next Page: Feeding the need for increased speed.