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May 3, 2010

A Buttonwood Tree Grows in Mahwah

NYSE Euronext makes N.J. data center cornerstone of its technology strategy

By Peter Chapman

It wasn't simply a landscaping flourish or a nod to history that prompted NYSE Euronext executives to plant a group of buttonwood trees outside their massive new data center in Mahwah, N.J. this spring.

According to Wall Street lore, it was under a buttonwood tree--better known as the sycamore--that 24 brokers formed the New York Stock Exchange in 1792. By planting six of the trees in Mahwah, the exchange operator was, of course, paying its respects to its heritage. Butalso, and more significantly, it was signaling that a new type of market center was being born.

 

See Sidebar: Risky Business

 

For more than 200 years, the building at 30 Broad and its predecessors were the center of trading, where brokers swarmed around specialists' posts shouting out their buy and sell orders. But for the next 200, NYSE executives hope the building at 1600 MacArthur Blvd. in Mahwah will fill that role, with traders' algorithms noiselessly interacting with the matching engines of its five equities and options exchanges.

For NYSE Euronext, the future is in co-location and being a "liquidity hub."

The New York has always been a manager of liquidity hubs, of course. At 30 Broad, it provides four walls within which brokers can conduct their business. It provides the doors that let them onto the trading floor. It provides a specialist who controls the action. It provides booths, telephones, market data, order routing and order management systems. And, of course, it provides the electricity, heat, running water, food and bathrooms necessary to keep everyone comfortable.

 

Center of Universe

The building in Mahwah is just one more facility. But instead of a specialist, it has a matching engine. Instead of doors, there are FIX gateways. Instead of brokers, there are algorithms. Instead of booths, there are racks. There is still market data. There is still order-routing connectivity. There are even order management systems, in case traders need them.

Stanley Young, NYSE Technologies

For NYSE Euronext, Mahwah is the new center of the universe. There will still be traders on the floor at 30 Broad, but they will be interacting with a server in Mahwah.

To make the dream a reality, the company has charged its commercial technologies division, NYSE Technologies, with the task of bringing in the traders and their algorithms. As the NYSE did (and still does) at 30 Broad, NYSE Technologies will do in Mahwah: supply traders with market data, order routing and a place to hang their (digital) hats.

The group has responsibility for the 400,000-square-foot facility in Mahwah and an equally large one in Basildon, England. They cost $600 million.

"Our data centers are the trading floors of the future," Stanley Young, chief executive of NYSE Technologies, told Traders Magazine. "The network electronically replicates the physical floor where people used to walk and talk."