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February 1, 2002

Server Farm Heaven

By Editorial Staff

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Rebuilding trading floors was not a top priority last year. Profits were down so traders made do. New hardware was purchased but only grudgingly.

The drive towards trading rooms with less equipment and more humans per square foot will continue, contends Andy Nybo, an analyst at TowerGroup, the Needham, Mass.-based securities industry consulting and research firm.

However, in the interests of efficiency and competitiveness, broker dealers will be forced to spend, spend, spend. That means more flat panels and the adoption of back-racking,' or moving the CPU off the trading floor and into the computer room.

Nybo has been at TowerGroup for two years. Before that he ran the Bond Market Association's research division. His recently published 11-page report, "Trading Floor Infrastructure: Choosing the Best Options," is an analysis on the direction of trading floors, both equity and fixed-income. Traders Magazine technology editor, Peter Chapman, put these

questions to Nybo.

Traders: Your report states that, in recent years, firms have reduced the required square footage per trader by 30 percent, from 30 square feet to 20 square feet. Is that primarily because of the replacement of cathode ray tube monitors with flat panel screens?

Nybo: Yes.

Traders: So, that means traders today have less space?

Nybo: That's right. They're using the extra space to pack in more traders.

Traders: Too bad. You have also said that back-racking is the wave of the future. IBM, of course, is leading this charge with its new off-floor CPU, IntellistationR. But Bear Stearns, which is in the process of moving onto new trading floors, put a Dell under every desk. What gives?

Nybo: You have to remember that IBM came out with the system just last Spring. That was in a tough environment with shrunken technology budgets. There was not much new investment in trading infrastructure in the past year. But, down the road, firms will look at those IBM solutions for four reasons: maintenance; lower cost of operations; lower environmental costs; and space savings.

Traders: Maintenance?

Nybo: When you back-rack the CPU, you save quite a bit in maintenance. You don't have to send someone out to a trader's desk to dig around and find out what's wrong. You just go into a hot swap. You unplug one and plug in another. It takes five to ten minutes.

Traders: Why lower environmental costs?

Nybo: Cooling and ventilation costs drop dramatically. The equipment is no longer on the trading floor. So there is less heat. Removing CRTs does the same thing. That was especially important last year with the spike in energy prices.

Traders: If all the CPUs are housed in a computer room doesn't that mean the computer rooms will have to get bigger?

Nybo: You would think so. But, on the other hand, the components are shrinking. Also, where will the servers be housed? Bandwidth has become extremely inexpensive. So, perhaps they will move the servers to offsite locations or disaster recovery centers. Offsite server farms are plugged into dedicated high-speed data networks.

Traders: Plus real estate is cheaper.

Nybo: Right. But, often they want them in a remote location for other reasons. It is environmentally-controlled. It has back-up power facilities. There is a full-time dedicated staff to that server farm.