The CME Group sees a future with the Linux Foundation

The Linux Foundation has another new organization on the membership roster this week. The CME Group announced it has joined the nonprofit organization, and its associate director, Vinod Kutty, will chair the Foundation's End User Council. The CME Group is made up of three derivatives, or futures, exchanges: the Chicago Board of Trade, and the New York and Chicago Mercantile Exchanges. Linux has played a major part of the financial services industry for many years, and representatives of the CME Group say it's time to become more involved in the evolution of open source technology.

In a prepared statement Kevin Kometer, Managing Director and Chief Information Officer of CME Group, says, "Our Linux Foundation membership allows us to move beyond just being users of Linux to being participants in the direction of this important technology. Joining the Linux Foundation and being deeply involved in Linux will also help the exchange determine the future use of our own technology."

Practically speaking, the move will increase the Group's input into the development of software developed for the financial industry, thereby giving them a boost in a very competitive global marketplace.

Kutty explains, "By most accounts, derivatives exchanges around the world do not compete with one another. Unlike the securities markets that compete for listings, the majority of derivatives products are created with intellectual capital or they are licensed products. Our main competition comes in the form of the over-the-counter (OTC) marketplace where 80% of the world's derivatives trade; only 20% of derivatives globally trade on an exchange. The OTC products often are similar or lookalike products to what an exchange would trade."

That competitive threat is a chief reason the CME Group chose to join the Linux Foundation.

"We're excited to see CME join, but not surprised at its intent," says Amanda McPherson, the Linux Foundation's VP of marketing and developer programs. "CME realizes that direct collaboration with the Linux community gives them a competitive advantage. They have bet their business on Linux to very good effect. We're seeing the innovators and leaders understand that to get the most of Linux it's important to collaborate with the community directly. Through our end user council and the yearly Collaboration Summits, companies like CME can collaborate closely with the brightest minds in Linux."

While it's unusual for large financial exchanges to sit down with kernel developers, it's not unheard of. Head Bubba, IT manager for international financial services group, Credit Suisse, was part of a panel that met with developers at last year's Kernel Summit to talk about the challenges companies face when using Linux.

Kutty will be picking up where Bubba left off. After attending this year's Kernel Summit, Kutty is slated to speak on behalf of the CME Group at October's Linux Foundation's End User Summit in New York, where he'll be talking about how the exchange has deployed Linux and where he hopes to see it go in the future.

Historically, financial transactions have taken place on an exchange's trading floor in a process known as "open outcry." This method is increasingly being replaced by electronic trading, however, and the financial industry appears to be ready to embrace open source technology in the process.

McPherson says, "the NYSE and most bank's trading systems are based on Linux. We're entering a third phase of adoption by financial services and Linux. At first it was just small, skunk works projects. Then it moved into broad-based adoption through vendors. Now we're seeing companies getting the most out of their investment by partnering directly with the community."

As a means to that end, Kutty, will work with members of the End User Council, Linux vendors, and also leaders within the Linux community to collaborate on technical and legal issues that affect FOSS. The CME Group has relied on Linux since 2003 and though it employs a variety of commercial and open source tools, Linux remains the dominant technology in use today. Kutty describes what they hope to accomplish:

Given the current state of the economy in the US, any small advantage for the financial industry is welcome. McPherson says Linux and open source technology can certainly help play a role in fixing what's broken. "The great thing about Linux is it's open and gives customers a great deal of flexibility in working with their vendors. It runs on multiple architectures and you can get support from various vendors (or not pay for support at all). This will become more and more appealing in our current economic environment. But given the collaborative development model, Linux thrives in any economic environment because of the choice it provides."