How to Do Financial Trading IT Right: Behind the Scenes at Liquidnet
With massive amounts of data, low latency, hundreds of connection points and no margin for error, financial trading is grown-up IT. Liquidnet does it in more than 40 markets with a staff of just 300. Here's how the company makes it work.
Tue, July 02, 2013
CIO — When most people think of big financial trades in Manhattan, they think of Wall Street, where the suit-and-tie culture applies to all roles, including the programmers and operations folks.
But there's more to Manhattan finance than Wall Street. Travel north about three miles and you enter the Fashion District, the land where 7th Avenue becomes Fashion Avenue—where people believe that good design will lead to success, instead of the other way around.
Midtown is also the home of Liquidnet, a trading firm with a no-tie policy, $49 billion in average daily natural liquidity—and only 300 employees. To achieve those numbers, the company needs a lot of IT; nearly half its employees work in information technology.
This May, Liquidnet opened its doors to host the Workshop on Performance and Reliability (WOPR), which brought me into town. When the company offered to let me in a day early to talk about how it company does IT, I didn't say no. But I did bring my notebook.
Explaining Financial IT to a Mere Mortal
I get off the elevator on 15th floor and walk past reception and the lunch area with the frozen yogurt and slushy machine (more on that later). I'm ushered into an office to meet Stefan Kutko, who you might say is a manager of application development for Liquidnet.
"You might say?" I ask. "Tell me more about that." It seems as good a place as any to start.
Kutko explains that Liquidnet integrates large institutional investors, allowing them to trade large blocks of shares without disrupting the market.
"The average trade on the New York Stock Exchange is 250 shares. Our average is more like 42,000. You simply can't sell that kind of volume on the street in one trade, so you have to break it up," he says.
When that happens, though, people take notice and try to profit. "Now they know daily supply will be very high," Kutko says. "We don't want to take advantage of the market—we're the good guys—so we pair up buyers and sellers. You could think of it as a wholesale marketplace. To technology people, that also looks a lot like a database of buyers and sellers."
Kutko's group creates Web applications to expand those trades into something he calls "capital markets," or off-exchange ventures where a company trades its own stock directly, like a buy-back or IPO.