2013 Review: For Exchanges in 2013, Life’s a Glitch

At an emergency meeting on Sept. 12 in Washington with leaders of the equities and options exchanges as well as FINRA, DTCC, and the Options Clearing Corporation, US Securities and Exchange Commission chairman Mary Jo White stressed the need for all market participants to “work collaboratively to strengthen critical market infrastructure and improve its resilience when technology falls short….[and] enhance the integrity of market systems.”

The Washington meeting was precipitated by a series of glitches over the year, most notably on Aug. 22 when Nasdaq OMX was forced to halt trading in all stocks listed on the Nasdaq Stock Market and options traded on its NOM, BX and PHLX markets for three hours. A postmortem revealed that the problem was caused after NYSE Arca sent erroneous quotes and connection messages (amounting to 26 times the normal amount of per-port activity) to Nasdaq’s securities information processor, which processes and distributes data on Nasdaq-listed securities under the UTP Plan consolidated tape (IMD, Aug. 22).  

Following the meeting, the SEC gave US exchanges 60 days to provide an action plan to address the issues, and on Nov. 12, the trading venues announced they had reached a general agreement, including a proposal to deliver improvements to the operational resiliency, interoperability and disaster recovery capabilities of the UTP, the Consolidated Tape Association for NYSE-listed securities, and the Options Price Reporting Authority’s consolidated feeds of US options quote and trade data (IMD, Dec. 9). The exchanges are now working on fleshing out the details for each proposal, which will be submitted to the SEC for public comment and official approval during the course of 2014.

But the failures continued. A mere four days after the meeting, OPRA was forced to cancel a software upgrade for its feed after experiencing issues with calculation of the National Best Bid and Offer price, prompting US options exchanges to halt trading (IMD, Sept. 16, Sept. 20). A month and a half later, another technical issue resulted in the International Securities Exchange’s main market and secondary options exchange Gemini not being included in the OPRA NBBO feed for part of the morning on Oct. 30 (IMD, Oct. 30). Most recently, NYSE Euronext experienced a malfunction on Nov. 4, after all trades processed by the New York Stock Exchange and NYSE MKT were mislabeled on the CTA consolidated tape.

In response to the current climate of fear over data glitches, a number of vendors developed products and services designed to deliver more reliability and resiliency around market data dissemination. For example, in September, NYSE Euronext deployed UK-based real-time systems and latency monitoring vendor ITRS’ Geneos monitoring platform across its US equities and options exchange environment to g monitor the availability and performance of market data feeds from other trading venues (IMD, Sept. 30).