Technology and Trading

Hello! My name is Allison Michel and I am coming to you live from one of CBOE’s 2000 servers.  Well, probably more than one of them.  The server that I am writing on is replicated, so even if my server combusts, I won’t have any problems writing my first blog.  As I said before, my name is Allison.  I am a summer intern at the CBOE.  I am currently a junior at the University of Dayton, studying Finance and MIS.  Many times, when I say that combination to others, I get a very confused look.  “If you want to go into IT, why even bother with the finance classes?”, “If you want to trade do you really need to know programming?”, and my personal favorite “those have nothing to do with each other.”  Well I beg to differ.  And after going on a tour of the CBOE technology department, I realized just how large of a role technology plays in running an exchange.  Technology is of such high importance to the trading world that the CBOE goes to great lengths to ensure that it never fails.

The trading floor of the past is not exactly what it used to be.  With the rise of electronic trading, more and more people are trading yelling at other traders for yelling at their computers.  And even in the SPX pit, that is solely open outcry, the traders all rely on tablets that feed them price data to make decisions.  And then they signal the orders to their clerks, who electronically communicate their orders to their companies.  A problem in their technology could be a huge risk for their company.  And the trading systems that they use from CBOE are closely monitored by staff 24/7.  There is staff standing by at all times to ensure that there is not a delay or fault in any of the trades.

As Maverick said in Top Gun, “I feel the need for speed!” CBOE really took this line to heart when they looked into order flow times. CBOE technology is very focused on speed for their traders.  Since electronic trading has swept through the trading world, it no longer matters where you are when you trade.  And now that you don’t have to be on La Salle Street to trade through the CBOE, a great number of trades now come to us through Wall Street.  And with New York dominating in stock order volume, the 17 extra milliseconds that it took for an electronic trade to travel from New York to Chicago was far too grueling for us to bear.  Ain’t nobody got time for that.  So CBOE moved.  Well, our data moved.  CBOE’s main processors now are housed in the Suburbs of New York so that there is no delay.  But of course, that isn’t our only option.  We made sure to diversify our technological portfolio.

When the CBOE technology moved to the NY suburbs, they didn’t take all everything with them. Instead, they replicated their system to more servers.  That way if anything were to happen to their east coast site, they would be able to easily flip back to their Chicago site and continue running seamlessly.  And there is also a back-up to the back-up in the Chicago suburbs, just in case.  And if the power ever goes down, the roof is filled with generators to power us for days.  And we also have a bank up fuel supply just in case the generators run low.  I tried to think of a scenario in which the CBOE system would fail here, but I couldn’t think of any.  CBOE technology has thought of every possible way to protect their systems from any possible outages.

In case you missed it before, CBOE created an entire new data center, just to save 17 milliseconds of time.  If this doesn’t show the importance of technology in the trading world, I don’t know what will.  Throughout my summer as an intern, I have had the opportunity to see many different sides of the trading industry, and understand how they all work together.  And after my tour of CBOE technology, I can’t wait to go back to school and list en to all of my finance major friends that an Econ double major would be a much more practical compliment to finance. Technology is of growing importance to traders, and I can’t wait use my Finance and MIS majors to take full advantage of it.

  • Eric Sampson

    Nice article, Allison. Gather as much technical expertise as you can. Many yrs ago I was encouraged to stop at one semester of typing, since certainly I would have a secretary for that in the future.. Ahem… Currently wishing I had learned to code as well as conjugate Spanish verbs.

    Learn as much about VIX as you can from the highly esteemed Mr. Rhoads while you are there and you will go far.

  • Allie Michel

    Eric- I am so glad you enjoyed my blog! And thanks for the advice!

  • Ben

    sounds like a very interesting internship.

  • Mett Davis

    Hello, Allie, my name is “Mett” Davis. I enjoyed your article and video, and envy you your recent internship experience. I visited the CBOE years ago, and have enjoyed getting to know a few people and brokerages in Chicago, such as the folks at Thinkorswim.

    My son, Emmett Davis, and I are currently learning more about (and from) the folks at TradeMonster/OptionMonster. I subscribe to the OptionMonsterTV YouTube channel, which is how I happened to see your and Russell’s video.

    I have a background in business and I.T., and a long interest in options trading. Emmett is a Flyer, too; he is traveling back to U. Dayton, today, where he will finish next year in communications.

    He has traveled a lot in Europe and China, and is continuing his Mandarin studies at UD. Both in school and through me, he has had varying degrees of exposure to finance, economics and business, and like me, Emmett has a long interest in stock and options trading.

    I think you and Emmett probably have different, but complementary skill sets, and it is easy to imagine that you may cross paths someday in the markets, banks, etc. around NYC, Chicago, and elsewhere.

    I hope you and he can have a conversation, cup of coffee or something, while still at UD, to kick off your acquaintance. He is emmettdavis4@gmail.com (don’t know his Flyer email address) and cell/text 864-293-0606. I am mettdavis@gmail.com and cell/text 864-304-9068.

    We would welcome the opportunity to correspond with you and your classmates, intern friends, etc., regarding the value of your internship experience, and the current job market in Chicago.

    I am currently preparing introductions and possible entrees for Emmett in various cities and countries…thinking ahead, beyond graduation. If any of my/our resources and relationships might accrue to your benefit, we would be happy to share them with you, particularly since you seem to be on a parallel, but compatible career path.

    Of course, once you all get situated in the business world, I look forward to staying in touch regarding prosaic finance and trading issues, du jour; …your from-the-scene reports are fascinating for a home gamer, like me.

    Good luck and Regards – Mett Davis