At the Linux on Wall Street conference, Citigroup discusses its use of open source.
NEW YORKLinux and open-source technologies are here to stay and will continue to make inroads into the financial services sector, speakers from both the vendors and Wall Street communities said here at the Linux on Wall Street conference.
In a session titled "Leveraging Open Source to Build Cutting Edge Trading Applications," Jeremy Lehman, chief software architect for global equities at Citigroup, told attendees on April 24 that open source has changed the traditional buy-versus-build scenario to one of buy, build or extend.
"Open source allows you to add features that are very specific to your business, while it also provides effective alternatives to J2EE [Java 2 Platform, Enterprise Edition], which has perhaps not lived up to expectations," he said.
Lehman and his team are building a new algorithm-based trading system to help align the Citigroup organizational structure, processes and incentives so as to orchestrate deep change.
Algorithmic trading has four principle challenges: latency and throughput, market data, productivity, and market access, Lehman said, adding that the challenge is not coming up with new algorithms, but rather translating those into reusable software.
No single source of data is reliable enough for Citigroups needs right now, he said, and the company needs to be able to translate that data quickly, effectively and accurately while being the first to do that.
There are a number of innovations coming down the pike from Citigroup on that front, "but were not going to discuss that now," Lehman said.
Open source is not in as broad use in other parts of the world as it is in the United States, and Citigroup faces some pressure to use it globally. "But we expect that to change significantly over the next few years," he said.
The total cost of ownership is not a primary driver for using open source, Lehman said, but its rather about focus and investing where there would be a distinct advantage to the business.
Read here about two reports IBM sponsored that laud the benefits of Linux.
From a Wall Street perspective, the question of using open source involves looking at whether or not the software can create a significant competitive advantage.
If the answer to that is yes, this then needs to be internally developed. If the software will not bring a competitive advantage, it should be outsourced and acquired from a vendor or found in open source and extended, Lehman said.
He also recommended that customers not treat vendors just as vendors, but rather create relationships with a small number of those who can provide the products and services to meet their needs.
While open source is attractive in that it is the easiest migration path from proprietary Unix to Linux on Advanced Micro Devices or Intel chip sets, that software still has a way to go on a number of fronts.
"A few things remain to be done, especially around performance, as open-source software is made to meet the needs of the majority of users. High-frequency trading is at the 0.1 percentile for performance. That is a good thing though, as it allows companies like Citigroup to develop proprietary technologies for this that enhances our competitive ability," Lehman said.
Open-source software also has some missing functional areas, such as on the messaging, business process management and analytics fronts, he said.
Also, the integration of components into stacks needs more work, as the operating system cycles are faster than the internal certification process, he said.
"But Citigroup makes extensive use of open source, and it will be an integral part of what we do for many years to come," Lehman concluded.
Next Page: Challenges on Wall Street.
Peter Galli has been a financial/technology reporter for 12 years at leading publications in South Africa, the UK and the US. He has been Investment Editor of South Africa's Business Day Newspaper, the sister publication of the Financial Times of London.
He was also Group Financial Communications Manager for First National Bank, the second largest banking group in South Africa before moving on to become Executive News Editor of Business Report, the largest daily financial newspaper in South Africa, owned by the global Independent Newspapers group.
He was responsible for a national reporting team of 20 based in four bureaus. He also edited and contributed to its weekly technology page, and launched a financial and technology radio service supplying daily news bulletins to the national broadcaster, the South African Broadcasting Corporation, which were then distributed to some 50 radio stations across the country.
He was then transferred to San Francisco as Business Report's U.S. Correspondent to cover Silicon Valley, trade and finance between the US, Europe and emerging markets like South Africa. After serving that role for more than two years, he joined eWeek as a Senior Editor, covering software platforms in August 2000.
He has comprehensively covered Microsoft and its Windows and .Net platforms, as well as the many legal challenges it has faced. He has also focused on Sun Microsystems and its Solaris operating environment, Java and Unix offerings. He covers developments in the open source community, particularly around the Linux kernel and the effects it will have on the enterprise.
He has written extensively about new products for the Linux and Unix platforms, the development of open standards and critically looked at the potential Linux has to offer an alternative operating system and platform to Windows, .Net and Unix-based solutions like Solaris.
His interviews with senior industry executives include Microsoft CEO Steve Ballmer, Linus Torvalds, the original developer of the Linux operating system, Sun CEO Scot McNealy, and Bill Zeitler, a senior vice president at IBM.
For numerous examples of his writing you can search under his name at the eWEEK Website at www.eweek.com.