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October 14, 2009

Cover Sidebar: Nasdaq Claims to Be the Fastest

By Peter Chapman

Nasdaq OMX Group's stock exchanges are now the fastest in the world-at least, that's what Nasdaq says.

Upgrades made this year to its INET platform and other parts of the technology that underlie five of its trading venues have given Nasdaq an average latency of less than 250 microseconds, the exchange operator says. That's faster than BATS Exchange, which recently announced it executes 80 percent of its orders in under 400 microseconds.

Nasdaq uses the INET platform, which it bought in 2005 for $940 million, to run its primary U.S. stock exchange, the BX marketplace, the Nasdaq Options Market, the PHLX Options market and its European multi-lateral trading facility. It will soon run its Nordic exchanges on the INET platform, said Brian Hyndman, senior vice president for transaction services at Nasdaq OMX.

This year's upgrade to INET is the first since Nasdaq bought INET four years ago. The upshot, according to Hyndman, is that latency has gone down, throughput has gone up and order acknowledgement times are more consistent. "We eliminated the outliers," Hyndman said. "That's very important to a lot of Nasdaq's customers."

This means, Hyndman explains, that a trader won't get an order acknowledgement in 250 microseconds on one trade and three milliseconds another time. "There will be no big spikes in standard deviation," the executive said.

Besides the changes to INET, whose main feature is the order-matching engine, Nasdaq also upgraded its network to 40 gigabits per second from a 10-gigabit connection; upgraded its hardware; and made a variety of other changes.


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