Linux and open source software are a key component in the underlying infrastructure of the finance industry, but the higher layers of the stack are still dominated by a multitude of proprietary, in-house solutions. A software startup called Marketcetera aims to change that with a new, open source platform for building automated trading systems.
The project, which has been under development for over two years, is the brainchild of CEO Graham Miller and CTO Toli Kuznets, a pair of Stanford computer scientists. I spoke with them on Monday and learned more about the technology. The Marketcetera Trading Platform is built with Java and is designed to facilitate rapid deployment and ease of extension. It provides APIs and a JRuby scripting engine for extending it with additional functionality and specialized behaviors. The developers say that fairly complex trading strategies can be implemented with only a few lines of Ruby.As the declining global economy pressures financial institutions to cut costs across the board, open source software could provide a promising path for reducing IT overhead. The Marketcetera Trading Platform, which the developers believe is the first of its kind, aims to offer a cost-effective alternative to building a custom software platform in-house.
Financial applications and trading systems use a standardized communication protocol called Financial Information Exchange (FIX) that provides direct market access. Marketcetera's system extensively leverages QuickFIX, an open source library that supplies an implementation of the protocol. Several other existing open source libraries are used for various aspects of the platform's operation, including the QuantLib financial library and Esper, a Complex Event Processing framework.
Marketcetera intends to make money by offering service and support for the platform, an approach that Miller says will resemble that of MySQL or JBoss. The company also aims to generate revenue by delivering brokerage and market data services through the platform. According to Miller, the financial industry is tired of the lock-in and inflexibility inherent in proprietary solutions. Before he launched Marketcetera, he developed a slew of custom proprietary trading systems for various employers as an in-house developer. He contends that the niche proprietary system approach is impractical and ineffective. Open source solutions, he says, will be more flexible and cost-effective.
"Historically, people in our industry have been very concerned about licensing deals that lock them into long-term commitments to one vendor," he said. "We built out this application foundation as an open source offering [so] we would be able to provide people with maximum flexibility and a great starting place for trading applications."
The software has been available for some time now and has already been adopted by over 20 financial institutions. Marketcetera announced the official 1.0 release on Wednesday. The emergence of companies like Marketcetera demonstrates the growing relevance of open source software in areas that have traditionally been dominated by proprietary solutions. As cost-cutting imposes tighter constraints on IT budgets and the need for more flexible solutions continues to escalate, companies are turning to open source.
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