When Nasdaq shut down trading for three hours last Thursday, it didn’t just show how fragile our financial system is, it also showed how hard it is to get any of the implicated companies to say publicly what went wrong.
As Nasdaq revealed shortly after trading resumed on Thursday afternoon, the issues last week stemmed from problems with its “Securities Information Processor” (SIP), a shared network that acts as a central hub for trading information.
The company explained:
There was a connectivity issue between an exchange participant and the SIP, which led to degradation in the ability of the SIP to disseminate consolidated quotes and trades. The cause of the issue has been identified and addressed.
While Nasdaq still hasn’t identified the unnamed “exchange participant,” sources close to the matter told VentureBeat that the trading issues started with Arca, the electronic exchange owned and operated by NYSE.
According to the sources, issues with Arca emerged early Thursday morning and affected even the system’s backups. In an attempt to fix the problems, internal sources say, NYSE did what anyone else having computer problems would do: They unplugged their system and plugged it back in — at least 30 times.
That, however, turned to be a mistake. While unplugging Arca from the shared SIP system should have in theory fixed the problem, what it did instead was create a backlog of trading data that flooded the SIP when the switch was turned back on, the sources said. The end result of this was the shutdown that traders saw on Thursday afternoon.
A NYSE spokesperson we spoke to on Monday declined to comment on this story. There’s also no mention of any issues on the Arca trader alerts page, making it hard to pinpoint exactly where NYSE stands on the accusations.
Generally, no one at either company will speak on the record about what happened, which in turn means that neither company is willing to respond on-the-record to the other company’s off-the-record accusations.
As one source close to NYSE told VentureBeat, “It’s a bit like chasing a ghost.”
But while it still isn’t clear what the root cause of Thursday’s issues were, what’s clear is that Nasdaq didn’t have a working fallback plan to handle whatever did occur. This, as you might expect, is a major issue at a time when trading is getting faster, more connected, and more tech-heavy. (It also represents yet another black eye for Nasdaq, which has dealt with a variety of high-profile snafus over the past year.)
The source familiar with the NYSE’s thinking said that regardless of what caused Nasdaq’s issue’s last week, the fact remains that Nasdaq was unable to keep its trading going.
“Everyone’s a bit responsible, but the people at Nasdaq need to take a second look or a third look at the system they’ve set up, and they have to make sure this doesn’t happen again,” the person said.
The Securities and Exchange Commission is apparently trying to ensure the same thing. In reaction to last week’s problems, the SEC has asked both the NYSE and Nasdaq for reports on last week’s issues, sources familiar with the mater said.
While it’s too early to say what will come of the inquiry, the most likely outcome is that the SEC is going to demand more accountability from the exchange operators about how they run and audit their systems.
“The exchanges are going be forced to pay more attention, or regulators are going to step in and say ‘you guys need to play nice in the sandbox. If not you’re going to be held accountable or be fined,’” one person said.
Filed under: Business 
Nasdaq meltdown postmortem: many questions, fewer answers, and lots of finger-pointing
No comments:
Post a Comment