05.22.2013

GFI Prepares for Post-Dodd-Frank Era

05.22.2013
Terry Flanagan

Interdealer broker GFI Group is laying the groundwork for its planned futures exchange and swap execution facility, as the world of OTC derivatives makes the transition from a mostly-bilaterally traded and cleared environment to a centralized one.

The company, a provider of wholesale brokerage, electronic execution and trading support products is deploying Flash Memory Arrays from Violin Memory to increase the speed and capacity of its trading platforms across all assets classes.

“We looked to increase the speed, capacity, and density of our shared data storage platform and turned to Violin Memory to assist us,” said Jerry Dobner, chief technology officer at GFI Group. “By embracing this new technology, our clients will benefit from faster transaction speeds and a highly scalable electronic trading infrastructure”

Replacing spinning disks with solid state storage is part of a larger project GFI is implementing to prepare for the transition to the post-Dodd-Frank environment. The company has filed with the Commodity Futures Trading Commission to operate a futures exchange, or designated contract market (DCM), for trading swaps and other products, and also plans to register as an SEF.

“Storage is a key component of the strategy for building a low-latency trading environment for our planned futures exchange and SEF,” said Dobner. “Many instruments will require continuous price streaming, and so we need to provide low latency so that our clients can have trades executed instantaneously.”

On May 14, 2013 the CFTC finalized the rules requiring eligible swaps to trade on Swap Execution Facilities (SEFs). This concludes over two years of deliberations by the CFTC over the most effective way to regulate the over-the-counter swaps markets, with the intention of bringing greater transparency to this previously unregulated marketplace.

Once the rules have been published in the Federal Register, the timeline for implementation will come into effect. Sixty days after the rules are published prospective SEFs who have received temporary authorization from the CFTC may begin operating as SEFs.

With the adoption of final rules on swap execution facilities a fait accompli, SEF operators are gearing up for what promises to be a steady stream of business as mandatory trading of OTC swaps kicks in.

Violin’s Flash Memory Arrays are all-silicon shared storage systems designed to provide ultra-low data access latencies.

“Real time information access is today’s reality and Violin is building solutions to enable organizations like GFI, which rely on timely information access, to achieve their business goals,” said Don Basile, CEO of Violin Memory.

Along with storage, another aspect of GFI’s next-generation trading environment is automated trading. The company has brought in experts from the high-frequency trading community to help design a “proof of concept,” said Dobner.

Cloud computing figures in the strategy as well, especially from a change management perspective.

“With cloud, we can deploy new services and servers with a few commands, avoiding weeks of setup time,” Dobner said. “With a rapidly changing business environment, we need to be able to deploy new hardware and software without a long, laborious acquisition period.”

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