Island Builds New Institutional Platform Slated For Second Quarter

NEW YORK--Island is currently building a new platform for large institutions. That platform is slated to go live by the end of June. Island, which has built a huge business on the backs of retail and day-trading customers, now hopes to add institutions to this deepening liquidity pool.

According to William Sterling, VP of technology and operations at Island, the demand for Island has been tremendous from all types of firms. "From a technical point of view, we don't want anything to stop a subscriber from accessing Island, regardless of the type of firm." says Sterling. He says they have quite a few firms on board to demo the new platform, but no decision has been made yet as to who will be the first.

The company hopes to release the new software by the end of the second quarter. "We have a great reputation for building fast, dependable systems that actually work, and are easy to use….so we won't be releasing anything until its really ready," says Sterling.

The new system will be simple. The client will connect to two server applications, OUCH and ITCH. These proprietary applications, which were developed by Island, will act as the middleware between the subscribers and the Island systems. The subscribers will then connect through the Internet or through a frame relay network, depending on their needs.

The software itself is being written primarily in Java and C/C++. The quote portion of the software, ITCH, is available to view on their Web-site. OUCH is a proprietary API that is "very easy to develop to and in many ways better suited to our business than competing protocols [such as FIX]," according to Joshua Levine, vice president of core software development. "It is designed to be very high performance and fault tolerant."

According to Island's software development team, they will not be using FIX at all in this software, because, they believe, FIX is inherently less robust and lacking important features. Instead, the server applications will talk to Island using the OUCH and ITCH protocols, just like any other Island subscriber. Island claims that FIX conversions will not be necessary at any point. But for institutions already using FIX, Island plans to support FIX 4.0 within the next three months, using a FIX -to-OUCH protocol converter.

Although Island initially pitched and dedicated its service to retail and day traders, as liquidity has increased, institutions have started sitting up and taking notice. Of course, critics suggest that Island has a lot to learn about the likes of servicing large buy-side firms. These sources say that attracting that business takes more than technology. Other ECNs such as Instinet and Tradebook, offer their clients additional services, such as trade order management, as well as strong, long-standing relationships.

Critics also suggest that institutional investors will have difficulty executing large orders against Island's large retail customer base. But Island feels that the benefits offered to every one of its existing subscribers, great representation and tons of liquidity in a fast and reliable system, will be the same benefits attracting the larger institutions. "A large institution doesn't care whether the 10,000 share bid that he hits on Island is one large 10,000 share order from another colossal institution, or a hundred retail customers entering 100 share orders reliable system," says Andressen. "Liquidity is king."