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SIP to Get Tech Upgrades, While Consultant Hired to Conduct RFPs

The UTP SIP committee unanimously approved technology enhancements for a key market data feed, and also hired Jordan & Jordan to conduct two RFPs to replace Nasdaq when its contract officially runs out.

The committee that operates a major piece of market data infrastructure has moved forward on two issues that pertain to managing the operations of the securities information processor for Nasdaq listed stocks.

Nearly two weeks ago, the Unlisted Trading Privileges (UTP) SIP committee voted unanimously to approve the ten recommendations submitted by Nasdaq OMX to improve the operations and resiliency of a key market data feed.

As a result of the Feb. 13 meeting reportedly held in Coconut Grove, Florida, the UTP SIP committee comprised of major exchanges, FINRA and the SEC, voted to approve all of the changes proposed by Nasdaq, the current administrator for the SIP.

Though Nasdaq informed the UTP committee that it will stop running the SIP and not renew its contract, which ran out on Jan. 1st, Nasdaq will still administrate and act as the tech vendor for the SIP for the next two years.

At the same meeting, the UTP Operating Committee authorized consulting firm Jordan & Jordan to handle two request for proposals to evaluate services providers for both the UTP SIP and the UTP administrator. Jordan & Jordan is also currently managing a separate RFP to evaluate service providers for the Options Price Reporting Authority (OPRA).

The UTP SIP is responsible for the collection, consolidation and dissemination of best bid-and-offer data calculation, last sale reports and quotation information generated by the exchanges that quote and trade Nasdaq-listed securities in the United States.

The decision to move ahead with the upgrades comes five months after Nasdaq had first proposed the enhancements under scrutiny of the SEC following an outage of the SIP, which led to a three-hour halt in trading on Aug. 22, 2013. That incident raised concerns about the fragility of the plumbing that underpins the SIP for Nasdaq-listed securities.

Frustrated by the delay in waiting for approvals, Nasdaq terminated the contract out of frustration that it took the committee five months to respond when it was “on the hook and the SEC was paying close attention,” said the source close to the situation. Nasdaq wrote a letter to the UTP SIP committee on Nov. 25, 2015 informing it of its decision not to renew the contract, which in turn triggered the contractual need to put the job out for bid. “There were infinite risks to the business,” said a source close to the situation. Nasdaq sent a letter on Nov. 25, 2013, informing the committee that it would stop running the securities information processor, which starts the clock on finding a new service provider.

Since Nasdaq has two years (until Nov. 25, 2015) before its contract as technology vendor is officially terminated, the exchange operator will be carrying out the upgrades for the SIP, which include expanded disaster recovery capacity, implementing a standalone testing environment and introducing hot-hot recovery. In addition, the UTP SIP committee agreed to the governance change requested by Nasdaq to register a legal liability company or LLC for the SIP, which will protect the SIP operator in the event of another outage.

Meanwhile, Jordan & Jordan is preparing two RFPs, one for the UTP SIP and one for the UTP administrator and will manage the selection process for each one. The consultant is seeking firms interested in being considered as a replacement service provider and/or as an administrator for the UTP, according to a Feb. 20 press release. The RFP for the UTP SIP will be available for distribution to qualified firms by the end of April, while the RFP for the UTP administrator will be ready by July. [Additional information on these RFPs can be found on Jordan & Jordan’s website or contact utpsiprfp@jandj.com or utpadmrfp@jandj.com).]

These types of RFPs tend to attract exchanges, market data vendors, and large technology consulting and outsourcing firms. Now that Nasdaq’s 10 recommendations for enhancements and the governance change are being implemented, it remains to be seen whether or not Nasdaq will decide to rebid for either RFP. However, the source close to the situation dismissed this notion.

Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio

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