SDN: The Silver Bullet For Financial Services

High-frequency trading firms needed faster technology, so Lucera built the infrastructure to provide it using software-defined networking.

Susan Fogarty

October 3, 2014

3 Min Read
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Technology cynics may grumble that fully functioning software-defined networks have yet to evolve, but more examples are emerging and were in evidence this week in the SDN conference track at Interop New York. Lucera HQ, a cloud provider offering on-demand infrastructure to Wall Street trading firms, says it couldn't function with any environment but SDN.

The SDN movement is all about integrating the network with the needs of applications, a topic covered in the Interop session Application Control of Networks: Nirvana or Insanity. Jacob Loveless, founder and CEO of Lucera, explained that ceding control might be a frightening prospect for some organizations. But for those in financial markets, where a few minutes of application delay or network degradation can mean millions of dollars lost, the incentive to build reliable technology is strong. 

Lucera was spun out of financial services firm Cantor Fitzgerald in 2013 to fill a need for high-frequency trading infrastructure. After Knight Capital, a known leader in the field, lost $440 million in 40 minutes due to a computer glitch in 2012, there was a renewed focus on operational risk, said Loveless. While he noted that potential loss is "one of the side effects of moving very quickly," he stated. "As someone who's on the cold face of this problem, the network is the silver bullet."

The network provides the best operational control. He noted that you have the ability, through the network, to stop outgoing applications and collect the data you need to figure out what's going wrong. "When you enter failure mode in financial services, you're going to touch, feel, and smell that on the network long before you see it in any application."

Economics drives an incredible level of performance requirements for financial networks, he explained. The amount of data and number of trades is growing exponentially, while the amount of money financial institutions make per trade is suffering a "logarithmic decay." That means you need a very high level of scalability. He said he first began using SDN around 2003 or 2004 in order to deal with scalability, but now it's become the only way to operate economically.

Financial data is also bursty in the extreme, he said, leading to another challenge. An economic event makes traffic and trades increase by orders of magnitude, but the trading price of all stocks must remain constant in all locations. Capacity and compute must be scaled up and down in real time, almost instantaneously.

The only infrastructure that could accommodate those needs is SDN, said Loveless. "We're pretty comfortable in saying that we probably run the largest SDN in the world for finance, so our application and network infrastructure are essentially one and the same. Doing it any other way would actually probably be impossible for us."

Lucera's SDN was internally developed and the exact details are proprietary (but many are explained in this presentation). Although it is described as "open," it does not use OpenFlow. In general, he said, network access is controlled by logical flows (l-Flows). The network is "totally flat," with one layer of Pluribus Networks switches. 

Another benefit of the SDN is the ability for business owners to grasp the value of the infrastructure. "Flow-based networking elevates networking to a level a manager can understand," said Loveless. "In a flow-based model, you're able to look at each application and see what generates revenue and value, and then make modifications to the network to improve upon those," he explained. For example, one port may connect to the database, and another to customers in China, allowing business execs to understand and prioritize them. 

Lucera's "flat" design extends to its organizational chart, as well, which Loveless believes gives the company a clear advantage. The technical staff is not divided in traditional silos or hierarchies. "Everyone is an engineer. There is only one title, one budget, and one team, and we all work together as a cohesive unit." Employees are more effective and more motivated in this type of environment, he maintained: "You will attract better people and get more out of them because you have that multiplier effect."

About the Author(s)

Susan Fogarty

Director of ContentSusan Fogarty is the Director of Content for Interop and UBM’s media properties InformationWeek and Network Computing. She’s an industry veteran who knows the IT audience very well, having served in content development for the event for four years and media for IT professionals for more than 20 years. Prior to joining UBM in 2012, she held an Editor position with Dell and worked at TechTarget, where she served as an Editorial Director, for 11 years.

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