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    Chief Advisor to Robert Steele the new CEO at Wachovia

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    You are the Chief Advisor to Robert Steele the new CEO at Wachovia. What business process would you suggest be reengineered? Attached is the case.

    Securities trading is one of the few business activities
    where a one-second processing delay can cost a company
    big bucks. Wachovia Corporate and Investment
    Bank is addressing the growing competitive push toward instantaneous
    trading with a comprehensive systems overhaul.
    In a project that has cost more than $10 million so far, Wachovia
    is tearing down its systems silos and replacing them
    with an infrastructure that stretches seamlessly across the
    firm's many investment products and business functions.
    "Competitive advantage comes from your math, your
    workflow and your processes through your systems. Straight through
    processing is the utopian challenge for Wall Street
    firms," says Tony Bishop, senior vice president and head of
    architecture and engineering. The first step in the project, according
    to Bishop, was to prepare a matrix that cross-referenced
    every major function (such as research, risk management,
    selling, trading, clearing, settlement, payment, and reporting)
    to each major product (debt and equity products, asset-backed
    finance, derivatives, and so on). The project team then had to
    take a hard look at the existing systems in each cell.
    "We looked at the current systems and said, 'Where can
    we build standardized frameworks, components and services
    that would allow us to, instead of building it four different
    times in silos, build it once and extend it into one common
    sales platform, one common trading platform and so on?'"
    The resulting Service Oriented Enterprise Platform is
    connected to a 10,000-processor grid using Grid Server and Fabric Server from Data Synapse Inc. In its data centers, Wachovia
    brought in Verari Systems Inc.'s Blade Racks with quad core
    Intel processors. Bishop says he's creating a "data center
    in a box" because Verari also makes storage blades that can be tightly coupled with processing blades in the same rack. The
    processing load at the bank involves a great deal of reading
    and writing to temporary files, and the intimate linkage of
    computing and storage nodes makes that extremely efficient.
    "We now do pricing in milliseconds, not seconds, for either
    revenue protection or revenue gain," says Bishop. The
    advanced infrastructure has tripled processing capacity at
    one-third the cost, for a nine fold financial return, Bishop
    adds. Report generation that used to take 16 hours is now
    done in 15 minutes. "This is where IT becomes the enabler
    to new business capabilities," he says.
    Executing complex strategies based on arcane mathematical
    formulas, algorithmic trading systems generate thousands
    of buy and sell orders every second, many of which are canceled
    and overridden by subsequent orders, sometimes only a
    few seconds apart. The goal of these computer traders is to
    profit from minute, fleeting price anomalies and to mask
    their intentions via "time-slicing," or carving huge orders
    into smaller batches so as not to move the market. A one-millisecond
    advantage in trading applications can be worth $100
    million a year to a major brokerage firm, by one estimate.
    The fastest systems, running from traders' desks to exchange
    data centers, can execute transactions in a few milliseconds?
    so fast, in fact, that the physical distance between
    two computers processing a transaction can slow down how
    fast it happens. This problem is called data latency?delays
    measured in split seconds. To overcome it, many high frequency
    algorithmic traders are moving their systems as
    close to the Wall Street exchanges as possible.
    Wall Street's quest for speed is not only putting floor
    traders out of work but also opening up space for new alternative
    exchanges and e-communications networks that compete
    with the established stock markets. E-trading has
    reduced overall volatility in the equities markets, because
    volatility is a product of herd buying or selling, and trading?
    responding instantaneously to tiny price fluctuations?
    tends to smooth out such mass behavior. It has also
    provided established exchanges with new revenue opportunities,
    such as co-location services for companies that wish to
    place their servers in direct physical proximity to the exchanges'
    systems. E-trading also has created opportunities for
    a new class of vendors?execution services firms and systems
    integrators promising the fastest possible transaction times.
    At its most abstract level, the data-latency race represents
    the spear point of the global movement to eradicate barriers?
    geographic, technical, psychological?to fair and transparent
    markets. "Any fair market is going to select the best price from
    the buyer or seller who gets their [sic] order in there first," says
    Alistair Brown, founder of Lime Brokerage, one of the new school
    broker-dealers, which uses customized Linux servers to
    trade some 200 million shares a day. "At that point, speed definitely
    becomes an issue. If everyone has access to the same information,
    when the market moves, you want to be first. The
    people who are too slow are going to get left behind."

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    Wachovia Chief Advisor to Robert Steele
    Wachovia Corporate and Investment needs to reengineer the algorithmic trading system since it generates thousands of buy and sell orders. Speed is the ...

    Solution Summary

    The chief advisor to Robert Steele the new CEO at Wachovia are examined.