OSS Could Be Key in Leveling Stock Market Playing Field
by Kristin Shoemaker - Aug. 10, 2009Comments (1)- Related Blog Posts
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While there have been some questionable strategies playing out on Wall Street recently, and the Securities and Exchange Commission continues to scrutinize the legalities of a few high frequency trading techniques, former NYSE chairman William H. Donaldson's statement to New York Times holds true: if an individual investor can't keep up with larger brokerages, it's a major disadvantage.
Marketcetera feels that open source software is an ideal way for smaller brokerages to keep up with -- and perhaps outmaneuver -- their larger competition. Marketcetera CEO Graham Miller sees open source hosted/SaaS (software as a service) trading platforms as having particular potential for investors using high frequency trading methods. And Miller isn't the only one who believes this -- the evidence is vibrantly illustrated by Sky Road LLC's integration of Marketcetera's open source, automated trading platform into its SaaS financial services product line.
The challenges that small (and even mid-size) brokerages face are closely linked, and both are related to the old adage that time is money. Cutting edge, powerful hardware is costly to set up and maintain -- and this is an industry where redundant servers and reliable telecom infrastructure is critical. Then there's the cost of proprietary systems, and the inevitable complications that arise when a brokerage needs a customized feature or a little more flexibility over the creation, modification, or scope of trade algorithms. It costs money to be able to compete, and if you can't compete with larger brokerages, you can't bring in money.
Marketcetera CMO, Roy Agostino, says his company's hosted services offer users an approximately 81% savings per month over in-house proprietary systems (Marketcetera's platform can also be deployed on-premises, and service and support plans are available if desired). There are, of course, the traditional open source benefits as well. Any customers who need the platform modified are able to do so, either on their own, or through Marketcetera's development community.
The other advantages that open source software offers the financial services industry, says Rajesh Razdan, Head of Product Management at Marketcetera, is how fast a specific open source platform can be deployed, and the ease and flexibility it gives financial firms trying to find the right platform for their needs. Razdan says that while Marketcetera estimates its open platform cuts 70-80% off the normal 6-9 month closed system deployment time, the real benefits come from its transparency:
The reason for this [deployment time] discrepancy is that working through the proprietary model, you have to pass through a number of gates that obstruct efficiency. Negotiating with the vendor, no transparency, going through a pilot process, difficult collaboration, and in the end you wind up with a product that is inflexible to changing requirements.
Open access to a downloadable product, source and documentation allows for quick customization of an already sophisticated product according to needs. And benefits extend long past initial deployment. 6 months after deploying a proprietary product, if you want a change you have to go back to the vendor and start the slow process all over again. Contrast that with the open source model, which allows for the introduction of new modules that fit with existing architecture and can be deployed quickly.
The aforementioned Times piece ventured that the money and attention giant financial firms have invested in technological infrastructure and innovation could leave smaller firms and individuals in the dust. Reliable, modern hardware is beyond a doubt critical in stock trading today. But sound, well-planned strategies, and innovative, responsive, powerful software can bridge the gap between cutting edge hardware and bleeding edge hardware. And transparency? It would seem it saves time and money -- while keeping business out in the open.
