a win-win partnership

CASE STUDY
SECURITIES MARKET
MORE COMPETITIVE
A WIN-WIN
PARTNERSHIP
Alpha Group Uses Q9 Co-location Services
to Launch New Securities Market
With 20 to 25 per cent of
the total volume traded by
Canada’s five transparent
equity markets, the Alpha
Trading System is the
leading Alternative Trading
System (ATS) for Canadian
listed securities.
Alpha Group was established in May, 2007 by
nine of Canada’s leading
financial institutions with
the aim of increasing the
country’s securities trading
efficiencies and making
the Canadian marketplace
more globally competitive. Established for the
industry, by the industry,
the Alpha Group focuses
on increasing liquidity,
reducing the cost of trading and providing innovative services leveraging its
unique expertise, operating
model and technological
capabilities.
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ALPHA GROUP
they could come to market as quickly as
possible once the company was formed.
Following the same strategy, Alpha also
decided to outsource its requirements for
data centre services, and solicited proposals from a number of prospective partners.
TRANSACTION SPEED SETS
ALPHA APART
An exchange such as Alpha ATS is a
sophisticated and highly complex computing environment that, stated simply, is
based on a giant ‘matching engine’ that
matches ‘buy’ and ‘sell’ orders from the
market. In Alpha’s case, that matching
engine is part of a third-party application called TRADExpress, which includes
numerous functional components to support the many processes that make up a
trading system.
“A key part of Alpha’s value proposition as an alternative market is the speed
of execution of our trading services, and
I believe we have the fastest execution
engine in Canada,” says Karl Ottywill, CIO,
Alpha Group. “However, there’s more to a
successful ATS operation than just being
the fastest. Our system must never go
down, otherwise dealers will go elsewhere
to conduct their business.”
Alpha’s customers consist of the
roughly 200 registered brokers in Canada,
from small brokerage shops to bank
dealers and other large financial institutions. They all depend on Alpha’s speed
and reliability to take advantage of small,
often-short-lived price fluctuations across
different markets in order to provide the
best results for their clients.
ALPHA CHOOSES OUTSOURCING
FROM THE GET-GO
To succeed in delivering market-leading
trading services to customers, Alpha ATS
clearly depends on robust and reliable
information technology to support its
high-performance transaction processing needs. When its business was just
starting up however, Alpha was a classic IT
‘greenfield’ – no existing data centre and
no legacy technology. This allowed the firm
to make a number of technology decisions
from scratch, based on best practices and
unencumbered by history.
According to Ottywill, one of those decisions was to adopt a strategic outsourcing model for IT infrastructure-related
services right from the start, so they
could focus instead on building their core
trading business, which they know very
well. This strategy provided Alpha with
top-quality services at a low cost, while
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SELECTION PROCESS POINTS TO Q9
AS “BEST OVERALL”
CHALLENGE
To compete effectively against other
Canadian securities marketplaces
and to provide high-speed connectivity for partners and customers,
Alpha Group’s new alternative trading system, Alpha ATS LP, needed
a highly reliable and redundant IT
infrastructure to support non-stop
operations.
SOLUTION
Alpha decided to outsource its data
centre services requirements to a
third party, and after comprehensive
due diligence, chose Q9 Networks to
provide high-availability co-location
services based on a dual-site
architecture.
R E S U LT S
By choosing to co-locate at Q9,
Alpha was able to launch its new
platform quickly and create an
environment that supports “proximity
trading”, giving Alpha customers a
high-performance edge.
ensuring the agility to react quickly to any
changes or needs in the environment.
“We chose to leverage the core competencies of key technology partners we
would engage for software, professional
services and managed operations – whoever was best-of-breed for what our business model needed,” says Ottywill.
Citing one example, he describes how
they decided early on not to develop their
own trading application but rather chose
the existing TRADExpress software so
After conducting site visits and reference
checks and rating five potential partners
based on a comprehensive list of more
than 100 due diligence questions, Ottywill
and his team chose to establish a colocation services contract with Q9 to host
Alpha’s strategic business systems.
In addition to basic requirements for
space, power, cooling and connectivity,
Alpha’s main considerations were physical
site security and infrastructure redundancy
to ensure 100 per cent application uptime.
“Q9 clearly had the best offering overall,”
says Ottywill, citing Q9’s physical security
as one example. “Access to Q9’s facility is
tightly controlled – how you gain access,
what you can bring in and when you can
bring it in. They never compromise their
position on this, so it was comforting to
know that our investment in equipment and
services will always be protected.”
Furthermore, in explaining their choice
of Q9, Ottywill says that because their
business cannot be down, their software
and supporting infrastructure must be fully
redundant.
“Beyond the redundancy I expected to
see – everything from dual power capabilities, backup UPSs, diesel generators
and redundant HVAC, to a fully redundant core network switching fabric – Q9
also operates multiple, geographically
dispersed data centre facilities,” says
Ottywill. “This enabled us to implement a
dual-site architecture based on a secondary data centre location belonging to the
same service provider.”
With the assistance of a preferred
partner, Alpha installs, monitors and manages its own software and hardware at
its primary and secondary Q9 locations,
while Q9 provides space, power, cooling,
security and high-capacity ‘pipes’ between
its data centre locations. Q9 also provides,
monitors and manages cross-connects
required by Alpha and its participants.
ALPHA GROUP
“Q9 provided an architectural review and
then helped us construct our cage and
provided best-practice guidance on what
we needed to do,” says Ottywill, adding
that, “We continue to be impressed by their
top-notch staff.”
PARTNERSHIP YIELDS
WIN-WIN RESULTS
Thanks to Q9’s robust data centre environments and low-latency network connections, the Alpha ATS is able to quickly and
reliably service hundreds of connections
into the marketplace and execute the many
processes required to conduct business effectively. The result is ‘bullet-proof’ reliability
where a trade executes in less than a millisecond from the time an order hits Alpha’s
front-end gateway, to when an execution
report is sent back to the dealer.
“Once the trading system has been
established and the networking infrastructure streamlined, physical proximity to the
marketplace becomes critical in a market
where transaction speed is measured in
microseconds,” says Ottywill.
To use ‘proximity trading’ to help gain a
competitive edge, a number of Alpha customers are also co-locating their systems at
Q9 to be as close as possible to the Alpha
trading platform.
Building upon the proximity trading
concept, Q9 developed the Canadian
Securities Financial Services Hub, which
positions Q9 as a ‘one-stop shop’ for the
Canadian marketplace. Along with other
services, the hub lets participants connect
directly to the Alpha trading platform,
which avoids the need for remote connectivity and thus significantly increasing trading performance. The hub, driven by the
needs of the financial services industry,
connects to a consolidated market data
offering, accesses other markets through
a low-latency network infrastructure service (SCNI) and provides fully managed
operations in a vendor utility model.
“Alpha gained great value from financial services clients that were already at
Q9, as well as new Q9 clients coming
onboard to participate in the hub,” says
Ottywill. “Working with Q9 allowed us to
come to market very quickly with our ATS,
and their ability to install new proxim-
“Alpha gained great
value from financial
services clients
that were already
at Q9, as well
as new Q9 clients
coming onboard
to participate in
the hub.”
Karl Ottywill,
CIO, Alpha Group
ity trading participants quickly means
everything to us because the sooner we
get them trading, the sooner we start
generating revenue.”
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