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Schwab is first major financial services firm to offer trading on the Internet

One of the largest financial services firms in the nation, Charles Schwab & Co., Inc., serves over 3.8 million active investor accounts with over $216 billion in client assets. The firm was founded in the early seventies as a pioneer discount broker, emphasizing transactional and custody services. Now Schwab meets the changing needs of a new generation of investors with a more extensive range of help and guidance and an expanding array of financial products and services for its customers as well as strengthening the dozens they already enjoy.

An innovator in online brokerage service since 1985, Schwab was the first major U.S. financial services firm to offer trading via the Internet's World Wide Web. Its customers can trade listed and OTC stocks as well as mutual funds, get real-time quotes and access their account information at http://www.schwab.com. The engine running the Web site is an RS/6000 SP computer, one of nearly 50 RS/6000 computers on the job at Schwab.

WWW = lowest-cost trading
"The Web site belongs to one of our primary internal customers, Electronic Brokerage," says James Chong, the firm's vice president, transaction processing technology. His group supports the various lines of business into which Schwab is organized, as well as the more than 235 branch offices, four service centers and the computerized telephone operations that make it easy to do business with the company. "Without any advertising or customer mailing, just through word-of-mouth," he continues, "we had 10,000 customers signed up a week after we went nationwide with it. That meant quite a surge in transactions, of course.

"But Schwab was opening new general accounts at the rate of better than 80,000 a month earlier this year. Clearly, we had to find a way to do two things: Expand our transaction base at the same rate as our business so technology would never be a bottleneck to growth and handle that transaction base as cheaply and efficiently as possible. It's the only way we could continue to compete effectively. As it turns out, Internet trading is the lowest-cost medium over which we do business.

"To reach its transaction-handling goals, Schwab made a strategic decision to move from a centralized to a distributed computing model, employing a scalable platform. We do an incredible transaction rate, so we ended up evaluating UNIX server vendors, " Chong points out. "A major project like this demands a lot of vendor involvement, so I was also looking for a partner who was able, willing and had the resources to back me up. There are often features you require that aren't on a product list, so I needed someone able to work closely with the Schwab product teams."

"Internet trading is the lowest-cost medium over which we do business."
-- James Chong, vice president, transaction processing technology.

Choosing the SP
The firm chose RS/6000 hardware running AIX, IBM's industry-leading version of the UNIX operating system. Says Chong: "We chose the RS/6000 as our distributed platform for its easy scalability and IBM to make sure that we could look to a single vendor for the solution to any problems that might arise."

The software choice was CICS for AIX, which extends the distributed processing capabilities of IBM's online transaction processing (OLTP) family to include the UNIX LAN environment. "We wanted to stick with a market leader," says Chong, "and CICS as a family predominates. IBM knows transaction processing; I don't think there's any argument there.

"And, very importantly, especially when you're talking about going on the Internet, IBM brings with it the knowledge of the back-end systems and how to tie everything together seamlessly."

The main Web site engine is a Scalable POWERparallel Systems SP running Netscape Commerce Server on 12 of its 14 nodes. IBM's TCP connection router application runs on the other two, which back each other up via High Availability Cluster Multi-Processing (HACMP) for AIX software. HACMP enables up to eight RS/6000 servers to operate as a cluster, ensuring that shared data resources are highly available despite any single failure. The Commerce Server SP connects with a back-end SP running CICS for AIX on its 16 nodes.

In all, Schwab has more than 40 SP nodes at work, along with another 45 RS/6000 servers, handling its lines of business. "We've mandated that all transaction processing will be on IBM platforms," Chong says. "The eventual strategy is to re-architect our database, however, it makes the most sense -- by lines of business, geographically -- and distribute the database servers throughout the country."

Technology is the enabler
"If we can't process transactions, we're literally out of business. So another plus is that, once the servers are out in regional centers, each will be an autonomous site with one other site designated as backup. That will save us millions of dollars a year in current emergency backup systems."

Chong also feels the new distributed system will give the firm a better handle on quantifying transaction costs. "I'll be able to go to the business user -- TeleBroker Services, for example," he says, "and tell them: `When you want to add such-and-such number of lines, this is the amount you have to allocate to buy extra servers.' I'll have a matrix to go by. Over the long run -- say, another 12 to 18 months -- I expect our transaction costs to come down quite dramatically. And we have spare SP nodes available to handle just-in-time capacity as we need to grow."

Chong smiles: "It was Chuck Schwab himself who insisted we get on the World Wide Web. And President Dave Pottruck likes to say we're a financial services company on the outside, but we're a technology company on the inside."

To quote Chairman Charles R. Schwab directly: "In many ways, technology is the driver and enabler of all we do, and it's been Schwab's hallmark to enable customers to interact directly with technology themselves. Schwab will continue to build additional electronic channels to enable more investors to self-direct their financial affairs."

This page illustrates how one customer uses IBM products. Many factors have contributed to the results and benefits described. IBM does not guarantee comparable results. All information contained herein was provided by the featured customer and IBM Business Partners. IBM does not attest to its accuracy.



  
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