Euronext.liffe uses SUR facility to test forecast 300% volume increase

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1 Microsoft SQL Server TM Customer Solution Case Study Euronext.liffe uses SUR facility to test forecast 300% volume increase Overview Country: UK Industry: Financial Services Customer Profile Euronext.liffe is the derivatives business of Euronext, comprising the Amsterdam, Brussels, Lisbon, London and Paris derivatives markets. Business worth over 1,500 billion is traded through Euronext.liffe every day. Business Situation The exchange wanted to examine whether Microsoft SQL Server could handle the expected increase in database transactions over the next five years to help future proof its IT systems. Solution As a current user of Microsoft SQL Server 2000 it tested scalability through the Microsoft SQL Server Usability Review (SUR). Benefits Significant cost savings Scalable above expectations Future-proofed solution Confidence in architecture Testing gave me the confidence to let senior management know that SQL Server would be able to scale to the predicted volume for at least the next five years Mark Howden, Technical Architect, Euronext.liffe Euronext.liffe, the world s second largest derivatives exchange, was seeing volumes rise as a result of increased market volatility. The exchange already ran Microsoft SQL Server 2000 and wanted to ensure it could handle the expected quadrupling of database transactions over the next five years as it rolls out the LIFFE CONNECT trading platform across Europe. To achieve this, it engaged in a SQL Server Usability Review (SUR), which enabled the testing of various business scenarios. This revealed that SQL Server could process above and beyond the expected volume. The exchange can save time and money by building on previous SQL Server experience gained by the in-house development team. It has also provided the exchange with increased flexibility to evolve its architecture to meet future business requirements.

2 What we are doing is putting in place something that we know will scale to our needs in five years time. An added benefit is that with a few small application changes we can gain even more flexibility if it s needed. Clem Marsh, Director, Global Service Delivery, Situation Regulatory change has opened up the derivatives marketplace resulting in many derivatives exchanges seeing unprecedented volatility and ever increasing volumes. The introduction of the UCITS III Directives (Undertakings for Collective Investment in Transferable Securities), gives UCITScompliant funds run by units trusts, and mutual funds greater opportunity to invest in derivatives and other instruments on recognised investment exchanges. One such exchange, Euronext.liffe, faced the challenge of rising volumes and an increasingly volatile market. Formed following the purchase of LIFFE (the London International Financial Futures and Options Exchange) by Euronext in 2001, Euronext.liffe is the international derivatives business of Euronext and comprises the Amsterdam, Brussels, Lisbon, London, and Paris derivatives markets. LIFFE itself was established in 1982 to offer market participants a better means of managing their exposure to both foreign exchange and interest rate volatility. It soon diversified into a range of financial instruments. In 1992 it merged with the London Trade Options Market, adding equity options to its product range. Euronext.liffe is firmly established as the world s leading exchange for euro short-term interest rate derivatives and equity options, and offers a greater choice of derivatives products than any other exchange. In 2003, the Euronext.liffe exchange transacted 695 million contracts, with an average daily value of 375bn. Products traded include futures and options contracts across six product lines: short term interest rates, bonds, swaps, equities, commodities, and currencies. Trading on LIFFE was originally conducted by open outcry, where traders would meet faceto-face to trade in the pit. In 1998, the exchange embarked on a programme to transfer all of its contracts to an electronic platform, LIFFE CONNECT, developed inhouse. Today, LIFFE CONNECT is the most sophisticated electronic derivatives trading platform in the world and is designed and implemented by Market Solutions, the technology division of Euronext.liffe. It is also the world s most widely accessible electronic trading platform, making the Euronext.liffe markets available to customers through 676 connections in 28 countries worldwide. A further 283 member connections are supported for client exchanges; CBOT, TIFFE, and NQLX. Euronext.liffe is creating a single market for derivatives by bringing all of its derivatives products onto the LIFFE CONNECT platform. By replacing the multiple trading systems in Amsterdam, Brussels, Lisbon and Paris, it will reduce costs for customers and make crossborder trading cheaper, and easier. Microsoft SQL Server 2000 is the database that supports LIFFE CONNECT. By the end of 2004 it will support all of the business transacted on the exchange. At present the exchange is processing an average of 12,000 database transactions per second but predicts this will rise to over 50,000 per second within five years. To manage this explosive growth, the exchange needed to make a major decision about its core database solution and ensure it could support such high volumes. Solution As a current SQL Server customer, the exchange had built up a great deal of experience with the solution that it did not want to waste. But rising volume from the addition of new exchanges to the LIFFECONNECT platform and general

3 market growth meant it needed greater scalability. The exchange then set about identifying the number of messages the database could handle, based on the volume growth predicted over the next five years. It wanted to establish whether the existing architecture could scale to these levels as it was, or whether it would need re-architecting or a fundamental change of platform. Mark Howden, Technical Architect, Euronext.liffe Market Solutions, commented: We needed to be able to go back to Euronext.liffe senior management and categorically state that the Microsoft database roadmap would be able to cope, not only with the current volumes, but those predicted for the next five years. To examine the scalability issue, the exchange embarked on a SQL Server Usability Review (SUR) with Microsoft experts in Redmond, Washington USA. The SUR is used to identify queues within a customer s applications and analyses bottlenecks to give developers a clear understanding of what is going on within the application. One particular area that the exchange wanted to examine was testing both 32-bit and 64-bit platforms to see whether there were any performance benefits in moving to a new architecture. As part of the review, Microsoft placed consultants at Euronext.liffe to examine what the application involved, what the exchange wanted to achieve, and ensure that all test data and scenarios were representative of the business. They then tested various scenarios in parallel to identify results, perform analysis, and reveal where problems occurred. Code modifications were made to the solution before running a second batch of tests to determine the viability of a 64-bit platform. These revealed that the scalability and flexibility Euronext.liffe needed was achievable through the existing 32-bit architecture. Mark Howden then took the solution to Euronext.liffe senior management, confident that SQL Server would meet and surpass all of the criteria they had set out. Benefits Proven Scalability After conducting the SUR, Euronext.liffe has confidence that SQL Server can scale to the levels predicted for the next five years. It also proved that with some relatively minor changes it could provide additional headroom of up to 100,000 database transactions per second if needed. The ability to handle such large volumes of data is crucial, said Howden. It will help maintain our position as a competitive exchange with capacity to grow even larger. We are confident we can easily handle 60,000 database transactions per second. Clem Marsh, Director, Global Service Delivery, Euronext.liffe, felt that the testing was crucial to system planning. Marsh commented: What we are doing is putting in place something that we know will scale to our needs in five years time. An added benefit is that with a few small application changes we can gain even more flexibility if it s needed. Significant Cost Savings From Euronext.liffe s point of view, working with Microsoft experts in Redmond to examine the scalability in SQL Server has helped protect a large part of its existing investment in IT. According to Howden, the alternatives of completely re-engineering the system, or starting again with an alternative database solution, were simply not cost effective.

4 By working with what we ve got it s clear we ve avoided additional costs. If we had switched database vendors it would have been a far more expensive option. In terms of how much we ve saved, it has been substantial compared to using other database vendors, he said. Future-Proofed Solution The savings the exchange has made by continuing to use SQL Server could multiply as the solution evolves with the exchange s business needs. This future-proofing has given Euronext.liffe confidence that as it expands through the introduction of new financial instruments and derivatives, SQL Server can provide the support it needs to meet service level agreements. packs, or new versions of SQL on the customer application. James Page, General Manager of Global Partnerships, Euronext.liffe adds: This initiative is about building our relationship with Microsoft taking it to the next level. The Replay programme will give us the extra confidence that comes with prior testing on our applications. Scenario testing within the SUR gave Howden confidence that SQL Server could continue with a 32-bit architecture for the moment, but has the potential to switch to 64-bit in the future. The testing reassured us. We realised that at the moment 64-bit isn t the right way for us to go. In three to four years time it could be a different story, at which time we will go back and test it again to see what we can do, he said. The Microsoft developers that worked alongside Howden and his team to test LIFFE CONNECT were well equipped to help them plan with confidence for the future. They really thought laterally, proposing a different scenario for coding one of the components of the system that would result in twice as much throughput. This can now be investigated further by our developers, he explained. Going forward, Euronext.liffe will take part in the Microsoft Labs SQL Replay programme. The programme takes a customer application, in this case LIFFE CONNECT, and tests pre-releases like patches, service

5 For More Information For more information about Microsoft products or services, call the Microsoft UK Contact Centre on To access information via the World Wide Web, go to: For more information about Euronext.liffe products and services, visit the Web site at: Microsoft Windows Server System Microsoft Windows Server System TM is a comprehensive, integrated, and interoperable server infrastructure that helps reduce the complexity and costs of building, deploying, connecting, and operating agile business solutions. Windows Server System helps customers create new value for their business through the strategic use of their IT assets. With the Windows Server TM operating system as its foundation, Windows Server System delivers dependable infrastructure for data management and analysis; enterprise integration; customer, partner, and employee portals; business process automation; communications and collaboration; and core IT operations including security, deployment, and systems management. For more information about Windows Server System, go to: windowsserversystem 2004 Microsoft Corporation. All rights reserved. This case study is for informational purposes only. MICROSOFT MAKES NO WARRANTIES, EXPRESS OR IMPLIED, IN THIS SUMMARY. Microsoft, Windows Server, and Windows Server System are either registered trademarks or trademarks of Microsoft Corporation in the United States and/or other countries. The names of actual companies and products mentioned herein may be the trademarks of their respective owners. Document published July, 2004 Software and Services Products Microsoft SQL Server 2000