Trading on growth
The CTO of Island ECN keeps pace with an explosion in trade volume
During his five years at Island, in New York, Sterling has seen the company’s message traffic grow by 2,679 percent since 1998, with a 700 percent increase in average system volume. Handling this kind of explosive growth has kept him on his toes — and keeps his job in a state of constant change.
“Being a CTO forces you to adapt as both your organization and business change. If you’re at a smaller, growing company, it’s never going to be the same job each year,” Sterling says.
Island has grown into Nasdaq’s largest electronic securities marketplace, executing the most trades and shares of any ECN since November 2001. Because Island’s core systems are proprietary, managing the technology change to accommodate the company’s growing business needs is one of Sterling’s key roles.
Island’s systems distribute tasks, such as accepting and matching orders, over several systems to speed up the process. By using Intel-based systems over this distributed environment, the company can upgrade, add, and repair pieces as necessary instead of having to replace “larger monolithic systems that typically have huge costs and timeframes associated with them,” Sterling says. Plus, the company runs two redundant datacenters in New York and New Jersey to make sure services are always available.
Sterling says the performance, flexibility, and cost benefits of the proprietary core technology help give Island an edge.
“We’re competing with a floor-based trading model with human ‘specialists’ at the center of all trading at the NYSE as well as with computer-based trading systems at Nasdaq and other ECNs such as Instinet,” he explains, adding that Island’s system probably costs less than the flat screens on NYSE’s trading floor.
To keep Island ahead of the curve, Sterling divides his time between business concerns and the technology itself, making sure the two are working together. He knows he has a staff he can rely on for day-to-day operations or in an emergency.
“Thinking back to the days when there were three of us and we were trying to figure everything out as we went along, I can definitely say my strongest accomplishment has been the technology team we have developed over the past few years,” he says.
Sterling and his staff have been doing a good job, says Larry Tabb, vice president of securities and investment practice for the Tower Group in Needham, Mass. “[Island] has a great group of tech folks — they still are the fastest [kid] on the block … they continue to gain traction and be innovative in not only their technology but also their business model.”
With the ECN market consolidating and a few new ventures popping up — such as Nasdaq’s SuperMontage, a new order display and execution platform that Island intends to join — technology is at the forefront of changing the way the financial industry works. Still, Sterling reminds CTOs to keep an eye on the business side.
“Having a deep understanding of the necessary technology areas is always important, but without a very clear understanding of your business, it’s difficult to make the appropriate strategy decisions [in terms of] technologies chosen, the implementation path, and the hundreds of other high-level design decisions necessary to meet business requirements,” he explains.
