June 10, 2013

The morning open of June 6, 2013 for NYSE Euronext was delayed in markets based in Paris, Amsterdam, Brussels and Lisbon thanks to technical problems. This seems like another chapter in an unsettling trend where global exchanges with state-of-the-art technology are forced to stop trading while CIOs scramble to find the cause of the problem. We don’t have to look very far for examples: The CBOE had a delayed opening on April 25 and we all know what happened to Nasdaq OMX when it attempted to launch Facebook’s initial public offering.

With the billions spent on IT inside financial services firms, why are we seeing these trading glitches? Wall Street & Technology conducted a brief chat with Jo Kinsella, CEO of Financial Services, for Verdande Technology, for her take on these outages.

We seem to be hearing about stock exchange outages more often these days. What is causing these delays?

Jo Kinsella, Verdande Technology: There are a number of causes for these delays, encompassing everything from trade volumes to software and hardware outages. The important thing is learning from mistakes to ensure that they are not repeated. However given the speed of markets today, that requires having preventative measures in place. By the time a human identifies a problem has occurred there can be millions of dollars in fall out.

In this age of big data and cloud computing and HFT, should we expect these exchange delays to happen more often? Will they become standard operating procedures?

Kinsella: Until effective risk and proactive controls are put in place these sorts of exchange delays will continue to happen. Given the amount of data available, it is a matter of ensuring that you have the right surveillance and risk solutions to sift through the data to identify potential problems with enough time to act to prevent them.

Are exchanges taking these delays seriously?

Kinsella: Obviously those being affected by the delays are extremely aware of the problem. Given their increased frequency this is a topic that is getting serious visibility. While exchanges are not reliable, financial institutions will find workarounds to ensure their trading flows have the ability to leverage alternative markets. Where possible that comes in the form of shifting business to more reliable exchanges or may even go as far as effecting trading strategy to account for additional risks posed by individual exchanges.

ABOUT THE AUTHOR
Phil Albinus is the former editor-in-chief of Advanced Trading. He has nearly two decades of journalism experience and has been covering financial technology and regulation for nine years. Before joining ...