While Nasdaq OMX uses cloud services from Amazon, those services pertain to the exchange's Market Replay apps, not to the Halt Cross and IPO apps that caused trouble on Friday.
The Nasdaq OMX trading system is enormous, complex, and spread around the world. Reportedly, the offending apps hiccuped over order cancellations made during the rush that occurred when shares started trading Friday at 11:30 a.m. Once that delayed the system, a rash of cancellations occurred because investors weren't sure what was really going on with the shares.
Nasdaq OMX CEO Robert Greifeld told The Wall Street Journal yesterday that the exchange "is humbly embarrassed." Nasdaq had competed against NYSE Euronext to handle the IPO. Further, the company prides itself on the volume and speed of its transaction handling. "Our INET platform processes trades at sub-millisecond transaction speeds with close to 100% system reliability," boasts Nasdaq OMX's latest 10-K SEC report.
"This was not our finest hour," Greifeld lamented.
Could cloud computing have helped Nasdaq OMX to avoid this, and if so, how? Those aren't easy questions to answer. According to Greifeld, the applications that failed were repeatedly tested. In the end, it was poor design that brought it down, the CEO asserted.
Cloud services can help enterprises with software testing. Clouds also can provide additional computing power if integrated with certain systems, although it's clear that some companies don't trust clouds with their data.
Data security has been a concern for Nasdaq OMX, especially since the systems were hacked early in 2011.
But clouds may not have helped anyway, claims Mary E. Shacklett, IE contributor and president of consultancy Transworld Data. She says Nasdaq should be looking at tightening up parallel processing and ensuring better failover points. "That would help going forward, whether Nasdaq is doing this in traditional datacenters or in its own private cloud."
Cloud or no cloud, there is no real guarantee that accidents like Friday's won't recur. In its 10-K, the firm states:
Although we currently maintain and expect to maintain multiple computer facilities that are designed to provide redundancy and back-up to reduce the risk of system disruptions and have facilities in place that are expected to maintain service during a system disruption, such systems and facilities may prove inadequate. If trading volumes increase unexpectedly, we may need to expand and upgrade our technology.
Sadly prophetic words.
Nasdaq OMX press contact had not returned a phone call and email at press time.
Thanks for the insight on this, Chris. A lot of people still believe the hardware and software broke. It seems they're looking for problems on the wrong side of the man/machine interface. Maybe instead of more machines, they just need better men....
I hope we do hear more about the upshot to this computing fiasco. I only hope the news doesn't disappear as the fracas dies down.
One thing: For a system like OMX's, there are so many facets, so much contributed from acquistions, etc., so many moving parts, that we may never know where these apps originated or what exactly the CEO meant by poor design.
To get to the bottom of this, we'd have to know what to ask, and I'm not sure the company would answer the questions even if we knew what those should be.
Interesting observation, Dream Chaser, Computers are only the machinery of systems designed by humans. Indeed, it may be time to rethink the "brains" -- the basic concepts -- behind various systems. Where better to start than Wall Street?
First, an IPO is anthing but a "public offering. It is a reward for insider investors. This was a debacle of epic proportion by Morgan Stanley, over priced over subscibed, leaving no room for retail investors to scratch out a profit. Instead the retail customer got left holding the bag on the insider selling.
Second, never buy the hype.
Third if you are interested in getting in new technology innivations there are a number of sites like Kickstarter or Slated or Crowd funding to get in early and ride the wave of popularity. If it pays off you can sell your shares on Second Market.
"Could cloud computing have helped Nasdaq OMX to avoid this, and if so, how? Those aren't easy questions to answer. According to Greifeld, the applications that failed were repeatedly tested. In the end, it was poor design that brought it down, the CEO asserted."
So if the problem according to Nasdaq's CEO was poor design, then it goes just beyond fixing the technical hiccups The rule in design of any systems is you design for the worse case scenario I know it is more costly to honor this rule but at least you can be guarantee that such failures that happened last Friday don't occur.
I will like to hear more from Nasdaq's CEO with respect to this issue of poor design. Is the poor design a product of system size or capability? Can Nasdaq hold the party that poorly design the system culpable for the technical hiccups that occured last Friday?
We're not going to become a Nation of people leisurely loafing around while our pc's and iPhones execute high frequency trading duties around the clock for us that should be obvious. How do the "retail investor" seeking long term investments that have real value compete with systems and people who consider a stocks value at a lifetime of 12 seconds maximum?
I'm sure some heads will roll on this, and as I've mentioned in other situations I don't think that is the appropriate response. Companies, espocially big ones, are so tied to the idea of assessing blame and firing someone...it's far more useful fo work on fixing the actual technical problems.
Chris, thanks for these insights. Your input makes me think that there were a few factors that played into the Nasdaq OMX system's failure to live up to expectations. The hardware and software had been tested, apparently for every contingency. But it's always the unexpected, the unanticipated, that spoils the plan.
Throw in a few human miscalculations and the machinery didn't have a chance.
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