Post-trade outage drives pre-trade regulation

Post-trade outage drives pre-trade regulation

http://www.thetradenews.com/USA_news/Operations___Technology/Post-trade_outage_drives_pre-trade_regulation.aspx

For the first time in the modern era, issues related to the post-trade formation and dissemination of a consolidated quote brought trading in Nasdaq-listed stocks and equity options based on those stocks to a halt for approximately three hours on 22 August.

Unlike Nasdaq OMX’s infamous May 2012 Facebook initial public offering (IPO) failure, which involved Nasdaq OMX exchange systems and eventually cost the company US$10 million in fines from the US Securities and Exchange Commission (SEC), Thursday’s trading outage is thought to involve systems which route securities data to the exchange.

“Over the next few days, Nasdaq OMX is in the unenviable position of being seen by the public as the source of the problem, even though we do not know where the failure occurred,” explains Robert Stowsky, senior analyst with industry research firm Aite Group. “It could have been a problem at the securities information processor (SIP) or in one of the exchanges contributing data to the SIP.”

The role of SIPs in the US equities markets is to collect equity trade quotes and completed trade data for eventual distribution and publication.

In the case of Nasdaq OMX, it administers the SIP used to create the consolidated quote for Tape C securities, which consist of Nasdaq-listed equities, and is managed by the OTC/UTP operating committee, which represents the 12 US exchanges that trade Nasdaq-listed securities and the Financial Industry Regulatory Authority (FINRA) that operates the Trade Reporting Facility, which is used by alternative trading facilities (ATFs) to report their trades.

A separate industry organization, the Consolidation Tape Association, oversees the formation and dissemination of the Tape A and Tape B consolidated quotes, which consist of securities listed on the New York Stock Exchange (NYSE) and American Exchange (Amex) respectively.

“This is more a market infrastructure issue rather than a single-exchange issue,” adds Stowsky. “It just happens that Nasdaq OMX maintain the Tape-C SIP in this case.”

According to the limited information provided by Nasdaq OMX, which declined requests for comment, the SIP administrator began to notice a degradation in quote and trade distribution due to a connectivity issue. Nearly 75 minutes after Nasdaq OMX first identified the issue, the exchange halted trading in all Tape C securities. It then halted trading in all options trading based on those securities 12 minutes later. It was not until 51 minutes after Nasdaq OMX halted its trading of Nasdaq-listed securities that it implemented a regulatory halt in trading of all Tape-C securities.

The SIP managed to resolve the issue in 30 minutes, said Nasdaq OMX officials and began a phased re-start of trading at approximately 15:25 ET.

Although trade resumed prior to the closing bell, the industry and investors found it quite disconcerting.

“Any system that is as strategic to the operation of the US equities markets, such as a market utility like the SIP, that required 100% up-time should have had ‘hot’ failover capabilities,” said William Karsh, a special advisor at the National Stock Exchange (NSX). “Every system, which is critical to the US market system, should have this capacity.”

Karsh suggests that the SIP administrator or oversight committee put together plans or have processes in place to prevent similar events in the future. “If any participant acts in a manner that jeopardises a system’s performance and affects fellow users of the system, there should be a way to block the participant so that behavior does not cause the system to fail,” he adds.

The failure follows other serious technology problems for Goldman Sachs, which released a rogue algorithm on 20 August, which caused havoc with its options trading.

Goldmans’ algorithm sent erroneous options orders in the early minutes of the trading day and could cost the investment bank up to US$100m. Exchanges are currently in the process of identifying which order should be cancelled and the full cost may not be known for some time.

Regulatory knock-on

The trading outage comes at a time when the SEC is focused on trading systems and technology, having recently ended the comment period of its proposed Regulation Systems Compliance and Integrity (Reg SCI) on July 8.

If the regulation is implemented as written, it will replace the SEC’s voluntary compliance system for developing, testing and maintaining systems critical to the operation of the US equities market.

Aite’s Stowsky, sees the regulators sharing some culpability in the trading outage due to the SEC’s implementation of Regulation NMS, which created the current market structure.

Whenever there is an industry utility, it introduces a potential single-point of failure, he says and doubts if the distributed market structure has been tested rigorously.

“My experience in the industry is that organisations tend to squeeze the testing and quality assurance as they approach product delivery deadlines.”

Stowsky is also sure that politicians, and hence the regulators, will be following the reasons for the trade outage closely since it affects the perception of the US equities market as a fair and well run market.

“Anything that shakes that view will move to the top of their legislation or regulatory priority list.”

NASDAQ OMX and NGX Announce U.S. Physical Energy Alliance

NASDAQ OMX and NGX Announce U.S. Physical Energy Alliance
Press Release: The NASDAQ OMX Group, Inc. – Tue, Jul 9, 2013 10:05 AM EDT

http://finance.yahoo.com/news/nasdaq-omx-ngx-announce-u-140503566.html

NEW YORK and CALGARY, July 9, 2013 (GLOBE NEWSWIRE) — NASDAQ OMX Commodities and Natural Gas Exchange Inc. (NGX), a wholly-owned subsidiary of TMX Group, today announced that they have entered into a strategic alliance (the Alliance). The Alliance involves the NASDAQ OMX US physical energy entity, NASDAQ OMX Commodities Clearing Company (NOCC), a wholly-owned subsidiary of The NASDAQ OMX Group, Inc., and the physical energy exchange and clearinghouse of NGX, which serves more than 250 contracting parties in the US and Canada.
Together NGX and NOCC will provide a premier solution for transacting in physical energy in the US, helping customers maximize collateral efficiency, and enabling increased transparency and market liquidity. The Alliance will leverage NGX’s established US natural gas trading and clearing expertise combined with NOCC’s physical power know-how. NGX will offer trading and clearing services for the Alliance and NOCC will contribute account management, product development, and scheduling resources.
“Adding physical power products with an established organization such as NOCC is a natural addition to our successful physical natural gas business in the US,” said Jim Oosterbaan, President of NGX. “We expect this Alliance to help new and existing NGX customers to improve their liquidity and collateral efficiencies through cross commodity netting.”
“NGX is strategically aligned with our physical power business and their complementary natural gas products present a great opportunity to leverage our combined experience and capability in this unique regulatory environment,” said Magnus Haglind, Head of US Commodities for NASDAQ OMX.
Subject to regulatory approval, NGX, a recognized exchange and clearing agency in Canada and a registered U.S. Foreign Board of Trade and Derivative Clearing Organization, will list and clear physical power futures contracts based on NGX’s existing US physical natural gas futures contracts. As a result, contracting parties will benefit from:
Collateral efficiencies under existing NGX margining rules via spread credits and cross-commodity netting
Regulatory certainty
Improved liquidity and distribution in Canada and the U.S.
Introduction of physically cleared power products to WebICE through NGX’s alliance with the InterContinental Exchange, Inc.
NGX expects to list the physical power futures contracts in September in concert with the novation of NOCC’s remaining physical power contracts to NGX. The NGX physical power futures will initially be listed exclusively for the ERCOT (Texas) market, expanding later into the WECC region.
About TMX Group (TSX:X)
TMX Group’s key subsidiaries operate cash and derivative markets and clearinghouses for multiple asset classes including equities, fixed income and energy. Toronto Stock Exchange, TSX Venture Exchange, TMX Select, Alpha Group, The Canadian Depository for Securities, Montreal Exchange, Canadian Derivatives Clearing Corporation, Natural Gas Exchange, BOX Options Exchange, Shorcan, Shorcan Energy Brokers, Equicom and other TMX Group companies provide listing markets, trading markets, clearing facilities, depository services, data products and other services to the global financial community. TMX Group is headquartered in Toronto and operates offices across Canada (Montreal, Calgary and Vancouver), in key U.S. markets (New York, Houston, Boston and Chicago) as well as in London, Beijing and Sydney. For more information about TMX Group, visit our website at http://www.tmx.com. Follow TMX Group on Twitter at http://twitter.com/tmxgroup.
About NASDAQ OMX Group
The inventor of the electronic exchange, The NASDAQ OMX Group, Inc., fuels economies and provides transformative technologies for the entire lifecycle of a trade – from risk management to trade to surveillance to clearing. In the U.S. and Europe, we own and operate 23 markets, 3 clearinghouses and 5 central securities depositories supporting equities, options, fixed income, derivatives, commodities, futures and structured products. Able to process more than 1 million messages per second at sub-40 microsecond speeds with 99.99+% uptime, our technology drives more than 70 marketplaces in 50 developed and emerging countries into the future, powering 1 in 10 of the world’s securities transactions. Our award-winning data products and worldwide indexes are the benchmarks in the financial industry. Home to approximately 3,300 listed companies worth more than $6 trillion in market cap whose innovations shape our world, we give the ideas of tomorrow access to capital today. Welcome to where the world takes a big leap forward, daily. Welcome to the NASDAQ OMX Century. To learn more, visit http://www.nasdaqomx.com. Follow us on Facebook (www.facebook.com/NASDAQ) and Twitter (www.twitter.com/nasdaqomx). (Symbol: NDAQ and member of S&P 500)
About NASDAQ OMX Commodities Clearing Company
NASDAQ OMX Commodities Clearing Company provides trading opportunities to its physical power and natural gas trading counterparties, supported by sophisticated credit and risk management operations. It is part of NASDAQ OMX Commodities, which is a trademark of the NASDAQ OMX Group, Inc.
About NASDAQ OMX Commodities
NASDAQ OMX Commodities is the brand name for the NASDAQ OMX Group’s worldwide suite of commodity related products and services. The NASDAQ OMX Commodities offerings include power, natural gas and carbon emission markets and clearing services. NASDAQ OMX Commodities is a trademark of the NASDAQ OMX Group, Inc.

NASDAQ OMX Commodities Europe is the trade name of NASDAQ OMX Oslo ASA which is authorized as a commodity derivatives exchange by the Norwegian Ministry of Finance and supervised by the Norwegian Financial Supervisory Authority. All trades with NASDAQ OMX Commodities Europe are subject to clearing with NASDAQ OMX Clearing.
NOS Clearing ASA is the leading clearing house for the freight market and a specialist clearing provider to the commodities markets. The company is wholly owned by the NASDAQ OMX Group Inc. The clearinghouse, which is situated in Oslo, has more than 300 members.
NASDAQ OMX Clearing is the trade name of NASDAQ OMX Stockholm AB which is authorized and supervised as a multi-asset clearinghouse by the Swedish Financial Supervisory Authority in Sweden as well as authorized to conduct clearing operation in Norway by the Norwegian Ministry of Finance.
Cautionary Note Regarding Forward-Looking Statements
Information set forth in this communication contains forward-looking statements that involve a number of risks and uncertainties. NASDAQ OMX cautions readers that any forward-looking information is not a guarantee of future performance and that actual results could differ materially from those contained in the forward-looking information. Such forward-looking statements include, but are not limited to, statements about our capital return initiatives. Forward-looking statements involve a number of risks, uncertainties or other factors beyond NASDAQ OMX’s control. These factors include, but are not limited to, NASDAQ OMX’s ability to implement its strategic initiatives, economic, political and market conditions and fluctuations, government and industry regulation, interest rate risk, U.S. and global competition, and other factors detailed in NASDAQ OMX’s filings with the U.S. Securities and Exchange Commission, including its annual reports on Form 10-K and quarterly reports on Form 10-Q which are available on NASDAQ OMX’s website at http://www.nasdaqomx.com and the SEC’s website at http://www.sec.gov. NASDAQ OMX undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise.

NSE, NASD and Emerging Battle in the Capital Market, Articles | THISDAY LIVE

NSE, NASD and Emerging Battle in the Capital Market, Articles | THISDAY LIVE.

WOOD & Company Financial Services joins SGN

WOOD & Company Financial Services joins SGN

http://www.automatedtrader.net/news/at/142805/wood–company-financial-services-joins-sgn

First Published 3rd June 2013

Prague based broker joins SunGard Global Network

WOOD & Company Financial Services, a Prague-based broker with additional offices in Warsaw, London and Bratislava, has joined the SunGard Global Network (SGN) for international trading and connectivity.

WOOD will offer SGN members access to the stock exchanges of Budapest, Bucharest, Euronext (Amsterdam, Brussels, Lisbon, and Paris), Istanbul, Ljubljana, London, NASDAQ, NYSE, Prague, Vienna, Warsaw and Zagreb through this new connection.

“A number of financial institutions around the world are looking at Central and Eastern Europe to provide new opportunities and growth. In order to consolidate our leading position in the region, WOOD has chosen to leverage the SunGard Global Network to offer our clients reliable technology, a wealth of contacts, and strong regional expertise.” – Rupert Wood, Head of Equities, WOOD

BGC and Thesys form Epsilon Networks for microwave data networks for the financial community

BGC and Thesys form Epsilon Networks for microwave data networks for the financial community

First Published 31st July 2012

BGC Partners and Thesys Technologies partner to create high-speed microwave data networks

http://www.automatedtrader.net/news/data-news/129862/bgc-and-thesys-form-epsilon-networks

New York – BGC Partners has signed an agreement with Thesys Technologies to invest in the creation of high-speed microwave data networks for the financial community.

Starting with a route between Illinois and New Jersey at an estimated latency of under 8.5mS per roundtrip, the network is designed to transmit critical trading data related to the futures, equities, fixed income and other markets, between the CME, NASDAQ, BGC and ELX Futures data centers.

In addition to bandwidth leasing, Epsilon Networks will introduce a Fast Financials Feed (“FFF”) which will combine proprietary data delivery techniques with the microwave network route. FFF components will initially include access to BGC’s US Treasuries data products and through collaboration with data distributors, CME futures and equities data.

“We are constantly assessing new ways to further our position as one of the world’s premier suppliers of real-time, low latency trading solutions,” said Philip Norton, Executive Managing Director of E-commerce at BGC Partners. He continued: “Building the fastest high speed microwave information network will offer our customers a more rapid route to price discovery and arm them with the best tools possible to make smart trading decisions.”

“Working with Thesys to create the fastest access to critical trading data underscores our commitment as a leading inter-dealer broker to deliver compelling value solutions to our customers,” stated Richard Feldman, Director of BGC’s Strategic Transactions Group (“STG”). He continued: “The STG group is focused on identifying and evaluating new technologies, business investment and acquisition opportunities for BGC that align with our core markets and our customers’ needs while seeking to deliver attractive returns that will contribute to generating long-term value for our shareholders.”

Manoj Narang, CEO of Tradeworx, Inc., the parent company of Thesys Technologies, said: “We are delighted to partner with BGC in building the fastest microwave information network between Chicago and New Jersey, paving the way for improved price discovery and trading. We anticipate continued improvements in speed and reliability for the network based on the unique technology advantages that Thesys offers to its clients and partners.”

The microwave information network is expected to be operational during the fourth quarter of 2012.

Turkey in talks with LSE and NASDAQ on bourse partnerships

via Pocket http://www.todayszaman.com/news-314840-turkey-in-talks-with-lse-nasdaq-on-bourse-partnerships.html May 12, 2013 at 03:51PM

Countering HFT Exclusives, CME-Nasdaq Launch Microwave Connectivity for Market Data

High frequency traders are engaged in an arms race to shave milliseconds off their algorithmic trading programs, but exchanges claim they are out to level the playing field with faster data feeds available to all customers.

via Pocket http://www.advancedtrading.com/infrastructure/countering-hft-exclusives-cme-nasdaq-lau/240154198 May 06, 2013 at 10:20PM

NASDAQ OMX Completes Acquisition of 25% Stake in Dutch Derivatives Trading Venue TOM

The NASDAQ OMX Group, Inc. (Nasdaq:NDAQ) today announced that it has received the necessary regulatory approval for the completion of its acquisition of 25 percent of the Dutch cash equity and equity derivatives trading venue TOM, The Order Machine.

via Pocket http://www.derivsource.com/articles/nasdaq-omx-completes-acquisition-25-stake-dutch-derivatives-trading-venue-tom April 26, 2013 at 06:00PM

Exchanges Are Moving to Curb Private Trades

The chief executives of the three largest stock exchanges are joining forces for the first time to push regulators to rein in the increasing amount of trading that is moving off public exchanges and onto platforms like so-called dark pools.

via Pocket http://dealbook.nytimes.com/2013/04/08/exchanges-are-moving-to-curb-private-trades/ April 10, 2013 at 10:35PM

Nasdaq OMX agrees eSpeed acquisition

Nasdaq OMX will also issue around 15 million common shares over 15 years, increasing the total potential value of the deal up to $1.23 billion. The transaction is expected to be accretive to earnings within the first twelve months after closing, excluding deal-related costs.

via Pocket http://www.finextra.com/News/FullStory.aspx?newsitemid=24683 April 02, 2013 at 11:28AM