The three-hour outage on the Nasdaq last Thursday has us channeling Clint Eastwood as we look at the Good, the Bad and the Ugly of the outage. As a refresher, the Nasdaq exchange halted trading shortly past noon ET after it became aware of a problem disseminating price quotes.
With a few days to hone our 20/20 hindsight glasses, here is my take.
The Good (We use the term “good” pretty loosely.)
- The Nasdaq shutdown appeared to occur in an orderly manner and didn’t disrupt other parts of the stock market.
- Timing was “good” as it happened during the summer on a relatively quiet day and certainly didn’t have the same impact as the Flash Crash of 2010, which also happened on a Thursday.
- Technical issues were resolved in the first 30 minutes of the shutdown according to Nasdaq and the remaining time was used to coordinate with other key stakeholders (i.e. exchanges, regulators, etc) for an orderly re-opening 35 minutes before the market close.
To quote PC World, “A high-end SSD is the pinnacle of computer storage today. Ditching your hard drive for one of the latest SSD models is like dumping your go-kart and hopping into a Formula One car.”
But what is SSD?
SSD is a storage device that stores persistent data on solid-state flash memory, using integrated circuit assemblies as memory. SSD has no moving parts, which is one of many distinctions between SSD and traditional hard drives that have spinning disks.
SSD offers huge performance gains over other commonly used storage drives including SAS (serial attached SCSI) drives. For perspective, the typical enterprise spinning disk is a 15K SAS drive, which offers approximately 200 IOPS. Mainstream enterprise SSD on the other hand can offer 10,000-100,000 IOPS.
Why should I care?
Investment management firms are presented with an increasing amount of data, much of which holds the potential to uncover new investment opportunities. For some strategies (think high frequency trading and algo), the speed at which the data is processed is linked to the size of competitive gain.
The phrase ‘Big Data’ is the rising star of industry buzzwords, but what exactly does it mean? In this article we’ll aim to define big data and potentially more importantly, discuss the implications of big data on the hedge fund market.
Wikipedia defines big data as a “collection of data sets so large and complex that it becomes awkward to work with using on-hand database management tools.” As a result, the top software companies (i.e Oracle, Microsoft, HP) as well as financial application vendors are investing heavily in building systems to help companies harness the power of big data.
And big data just keeps getting bigger. According to IBM, each day we create 2.5 quintillion bytes of data from everyday activities including social media, digital pictures and videos, online transactions, GPS signals and more. Highlighting the explosion of data, it is estimated that 90% of the data in the world today was created in the last two years alone.
This week, the Securities and Exchange Commission (SEC) voted to propose rules that would require exchanges and broker-dealers who execute high frequency trades to provide trade information to a central repository in real time or near real time as a means for the SEC to better supervise trading activity. This proposal appears to be a result of the Dow Jones Industrial Average’s nearly 1,000 point drop on May 6 and a means for the SEC to better oversee the financial markets.
To many, high frequency trading remains a misunderstood and often unfairly-attacked subset of the investment industry. With this in mind, we’ve decided to take a closer look at what high frequency trading is and what the future may hold for this practice.
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