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Futures Exchange ELX Blends Hosted and Homegrown Ops Platforms
Billing and member communications are two of the functions for which the nascent exchange has turned to software as a service.
By
Penny Crosman
January 25, 2010
LX Futures, a U.S. Treasuries futures exchange in New York, had a technology head start when it launched last July. For its main technology platform the exchange relies on eSpeed, the U.S. Treasury trading platform that brokerage firm BGC Partners -- one of ELX's investors -- developed for itself.
But, "Although we have lots of technology that was leveraged for the trading platform, there are certain nuances about the way invoices and fees are handled in the futures community that weren't among our existing technologies," relates Joseph Noviello, EVP of BGC Partners and technology architect at ELX Futures. "I thought it made sense to look for existing solutions for the necessary fee modules. It wasn't necessary for us to worry about all aspects of the back-office components when we had an entire exchange to put together. We had enough on our plate already."
One software-as-a-service solution that Noviello harnessed for the new exchange is a billing platform from Firm58. Another is a notification facility from Send Word Now. "This allows us to send broad communications out to our user base and groups of targeted users," Noviello says. "This was not expensive to leverage, and it would have taken us a lot of time to build something that would work all the time with all the functionality we need."
Many exchanges and exchange participants, especially in the futures space, are using hosted clearing software and services, according to Noviello. "New entrants don't always need the largest machine, but they also do not want to build something on a small environment that doesn't scale," he explains. "In hosted environments those things become very easy. You shift the management of those capacity issues to somebody else. It's easy to sit back and have a provider keep up with the latest patches, the latest virus protection components, the planning for capacity growth."
But rivacy and security concerns around SaaS still linger on Wall Street, Noviello acknowledges. "Anyone who's dealing with sensitive information will be concerned about having their information hosted and managed by someone else in some other location," he notes. "That's always a hurdle to get over. But as firms get more comfortable with the controls in place to satisfy them that their information is not subject to manipulation, and as regulators approve these initiatives, people will become less sensitive [to security concerns]."
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