Back in 2006 and 2007, Microsoft ran a lot of advertisements, and published case studies, on the Windows-based trading system that had been installed at the London Stock Exchange [LSE] in September, 2005:
Using the Microsoft® .NET Framework in Windows Server® 2003 and the Microsoft SQL Server™ 2000 database, the new Infolect® system has been built to achieve unprecedented levels of performance, availability, and business agility. … Its successful implementation, with support from Microsoft and Accenture, shows the London Stock Exchange’s leadership in developing next-generation trading systems.
I have no special inside track on the doings at Microsoft’s Redmond WA campus, but I think this had to be a pretty big deal from their point of view. Historically, Sun Microsystems, with its UNIX workstations, had pretty much owned the “Wall Street” market, with HP, IBM, and DEC (as it then was) making occasional sales, also with UNIX workstations. This workstation-based technology made huge inroads with financial market firms beginning in the late 1980s. It was usually an easy choice; the only realistic alternative at that time would have been a mainframe-based system. PC-based systems in general, and Windows in particular, could not come close to delivering the performance and reliability required for a (nearly) real-time trading platform. Your obedient servant was quoted in the London financial press in 1992, saying that “anyone who installs a trading-floor system based on Windows has rocks in his head.”
So I think Microsoft valued the LSE deal, not least because they felt it showed that Windows had “grown up”, and was ready to compete with the big kids on the block. The primary system that the LSE had been using was quite an old one, called SEAQ (Stock Exchange Automated Quotation system). It was a modified version of a system called NASDAQ (National Association of Security Dealers Automated Quotation system), originally developed for the US over-the-counter equity market. LSE had adopted the system, which ran on Stratus fault-tolerant hardware, because it was a dealer market, like the US OTC market. (It did not have a centralized trading “floor” like, for example, the New York Stock Exchange had.)
Thus, it was considerably embarrassing when, in September 2008, the LSE suffered a trading systems outage of six hours and forty-five minutes, at a particularly inauspicious time:
It should have been a great day on the London Stock Exchange. The U.S. government had announced on the Sunday before that it was coming to the rescue of Freddie Mac and Fannie Mae. Trading would have been extremely brisk, but then, at 9:15 AM GMT, the Exchange’s software failed due to “connectivity issues.”
No explanation beyond vague statements about “connectivity issues” was ever given, as far as I know, but people I know in the City have told me that the Windows-based TradElect system was to blame.
Beginning this past summer, reports began to surface that the LSE was planning to ditch the TradElect system. It appeared that the system was never able to meet its own performance goals, nor could it match the performance of alternative systems.
It’s not often that you see a major company dump its infrastructure software the way the LSE is about to do. But, then, it’s not often you see enterprise software fail quite so badly and publicly as was the case with the LSE.
Now it is more or less official: the LSE is going to replace the TradElect system with a new, Linux-based trading system, built by a Sri Lankan company called MillenniumIT.
The question of whether London Stock Exchange (LSE) will replace its £40 million ($65 million) TradElect platform, supplied by Accenture, has finally been answered: yes, it will.
In fact, the LSE has bought the company, and will use its primary development center, located near Columbo, which employs 451 technical staff. The acquisition price was only $30 million, less that half what the LSE has already spent on TradElect to get less than satisfactory results. With this new acquisition, the LSE will obviously have much greater control over the future direction of development. They also expect to achieve more frequent software updates, and to save approximately £ 10 million in annual ongoing costs.
This is not only a black eye for Microsoft on this particular project; there are not many places in the trading world now where Microsoft has any presence at all:
With LSE and its Italian subsidiary, Borsa Italiana, converting to Linux, Microsoft’s .Net offering is left with virtually no takers – the only remaining one being Johannesburg Stock Exchange (JSE).
Oddly enough, there hasn’t been much talk about stock exchanges coming out of Redmond lately.
Windows was designed as an operating system for desktop personal computers, and it has its place in that environment (although even there, Linux today is a very viable choice). But when people ask me if I think that they should install Microsoft Windows servers and infrastructure, I always ask them the same question: What do you think you know about running servers that Google, Amazon, and Yahoo! (as well as, now, the LSE) don’t know?