Markets and regulators are looking at possible reforms to strengthen elements of financial market infrastructure in the wake of a couple of glitches in the dissemination of equity quotes at the Securities Information Processor (SIP) operated by NASDAQ over the past couple of weeks.
A problem with an overloaded SIP led to a three-hour trading outage for NASDAQ back on August 22; and, yesterday (Sept. 4), it also suffered an apparent hardware failure that did not disrupt trading.
The SIP committee (comprised of exchanges, financial firms and regulators to oversee the system) met yesterday to review the Aug. 22 outage; in an effort to better understand the causes of the disruption, and to consider a series of possible steps to strengthen the system’s resiliency.
The committee says that it discussed several short-term actions proposed by NASDAQ, including: measures to tighten the structural framework and provide additional clarity around participants’ roles and responsibilities; steps to strengthen its technology architecture and enhance operational resilience, such as manually terminating connections in high-traffic conditions; and, increasing the frequency of stress and failover testing.
The SIP said it will continue to work with market participants, its members, and the investing public, to help ensure efficient, transparent and reliable markets. “Our objective is to learn from the events and work together to identify appropriate solutions that improve the reliability, governance and operations of the SIP,” it said.
Additionally, NASDAQ said that the committee will also review the brief outage the SIP suffered yesterday. A preliminary review of the incident found that the SIP experienced a hardware memory failure in a server that affected price quotes for a limited range of securities, and that the system successfully failed over and operated normally.
NASDAQ said it will continue to work closely with the SIP committee and regulators to make sure that issue is addressed too.