John Goode is the chief information officer at the Boston Options Exchange (BOX), responsible for technology strategy, execution, and operations. He has been in the industry for 20 years and has held leadership positions in strategy, management, architecture, and the design of high performance systems. He discussed BOX’s most recent technology upgrades, and what the exchange is planning for the future, with Sarah Rudolph, editor of the JLN Options Newsletter.
In addition to a number of technology upgrades, The Boston Options Exchange Group, LLC announced on Nov. 9 that it had signed a new 5-year lease at 101 Arch Street, in downtown Boston. The new site provides a state-of-the-art facility for the exchange’s Market Operations Center and dedicated office space for half of BOX’s staff, which has moved to the new location.
Q: BOX has updated its technology this year. Can you tell me about that?
A: We moved to the Equinix Data Center [located in Secaucus, N.J.] in May. As part of the move, we also upgraded our technology platform. Our performance is very good; I like to say we’re wickedly fast. These days, if you’re not under a millisecond in response time you’re considered slow. We typically run at about 300 microseconds for quotes.
Our philosophy with the Equinix move was that we wanted to move to an environment that provided a complete ecosystem for options trading firms. We wanted to have our participants located within the same data center as BOX, as well as having the rest of the ecosystem that our participants need to be successful – market data vendors, application vendors, and financial extranet providers (which our participants use for network connectivity) all within the same data center.
I like and endorse having our competition close by too. That way, we can appeal to current customers as well as potential customers who are working with the other exchanges. With a cross connect and FIX connection, you can try out BOX.
In addition to the move to Equinix, we’re continually improving our technology. We have upgraded our hardware – I’m a big proponent of the latest HP hardware, Red Hat Linux Realtime, and Fusion IO Solid State Drives. Obviously, 10 gig Ethernet is our core networking platform. With that and software that’s coded to emphasize performance and low latency, I believe we have one of the faster platforms out there.
And we’re continuing to invest in future upgrades to the platform to make sure we stay close to the leading edge when it comes to performance.
Q: As far as your trading engine platform, are you still using SOLA, which BOX migrated to in July 2006?
A: Yes, in addition to upgrading our hardware architecture, we have made enhancements to our software, which is the SOLA platform. We licensed SOLA from the TMX Group and continue to work with TMX Group on enhancing SOLA.
Q: In October of last year, BOX switched from a maker-taker model to a Take Credit/Make Charge pricing model, which is basically the old payment-for-order-flow model, when most of the U.S. options exchanges were switching to maker-taker. What was the motivation behind that move and how is it working out?
A: We’re going after retail order flow, and that has reinvigorated our price improvement auction. So the PIP (price improvement period) that BOX founded six years ago is seeing a rebirth and an influx of activity.
Q: To what do you attribute that?
A: It’s a combination of things. It’s the ability to get price improvement for retail customers and to appeal to brokers too. The brokers starting PIPs on BOX can maintain good interaction rates since BOX doesn’t follow the specialist model.
Q: Aside from the technology upgrade, what else is BOX doing to remain competitive in this highly competitive environment?
A: We’re continuing to refine PIP and provide the best level of price improvement for retail customers. We also have our block facilitation mechanism getting ready to launch in early 2011, which should help block and institutional trading on BOX.
And we continue to look at further functional enhancements to focus on both retail and institutional customer flow.