Wolfgang Eholzer: The History of Financial Futures, Part 2

John Lothian

John Lothian

Executive Chairman and CEO

Eurex CTO Talks Technology Naming, Misdirected Microwaves and White Rabbits

In part two of the interview with Wolfgang Eholzer for The History of Financial Futures video series from John Lothian News and MarketsWiki Education, Eholzer explains where the names of Eurex’s trade matching engine and other technology came from. Eurex wanted a short name that could be easily copyrighted and easily reproduced for other products.

So besides the T7 match engine, there is the C7 clearing system, as well as R7 and N7 (Network). Eholzer likes prime numbers from his time as a mathematician at Cambridge, so 7 was a good number to pick, he said.

Besides a derivatives market with Eurex, Deutsche Boerse also has a cash equities business that was running on the old Eurex VMS machines. Deutsche Boerse was able to replace the 1990 Eurex trading platform on their cash equities exchange and on all their technology partner exchanges too.

The T7 trading platform was designed to run in just one instance for all the various instruments that were trading on the platform: futures, options, stocks. However, in 2020, when Deutsche Boerse went to move their certificates and warrants business, which was still trading on the floor, it created a new instance for these markets. That is because there were 1.5 million instruments traded and it was more of a local German market than a Pan-European one.

The 1990 “mother of all trading systems” would finally be retired in 2021 when new expiries and member and clearer data was moved to a new system.

Eholzer reflected on the battle between man and machine and machine versus machine in trading, noting how much trading happens in just one data center. Elholzer noted that ten nanoseconds is the fastest reaction time some trading firms now have to the market within the Eurex datacenter.

Some trading comes from outside the data center, which prompted him to recall a story of a colleague who discovered a misdirected microwave tower during a bike ride around the datacenter property and past all the microwave dishes.

It turns out that the misguided microwave dish was aimed at a farm field where it was pointed at a shortwave receiver and tower. The data was being sent across the Atlantic via shortwave rather than cross-Atlantic cable, to give the trading firm an advantage in arbitraging between Frankfurt and New York or Frankfurt and Chicago.

It is important to be able to measure all of this activity, Eholzer said, which brings him back to his physics days. In fact, he said the Eurex uses some of the same technology as the CERN Accelerator to measure the “nitty gritty” time differences. Eurex uses White Rabbit from CERN.

White Rabbit (WR) is a technology developed at CERN to provide the LHC accelerator chain with deterministic data transfer, sub-nanosecond accuracy and a synchronisation precision of a few picoseconds. ~ CERN

Lastly, Eholzer said that trading firms are fascinating to work with because they are always looking for new ways to find an edge and are on the bleeding edge, not somewhere exchanges can or want to be. Exchanges want to be on the leading exchange of stability, as they don’t have the same motivation to take risks trading firms will accept because of the return they bring.

Eholzer notes he has lost many employees over the years to trading firms, but has hired some from them as well.


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