February 3, 2014

SIP Needs New Operator

By John D'Antona Jr.

Nasdaq OMX Group Inc. gave notice that it no longer wants to run the marketwide quote service that broke down and froze thousands of its U.S. stocks in August, according to a person with direct knowledge of the matter.

Bloomberg reported that Nasdaq's decision means another company must be found to run the securities information processor, or SIP, according to the person, who asked to not be identified because the discussions are private. Nasdaq's role is poised to stop around the end of next year, the person said.

The handling of feeds that pipe trading information from exchanges to millions investors around the world became a point of criticism for Nasdaq OMX and its chief executive officer, Robert Greifeld, following the August shutdown that jarred the entire industry. SIPs operated by Nasdaq and the New York Stock Exchange process tens of thousands of quotes and trades each second and were portrayed as potential points of failure where the country's electronic trading infrastructure is vulnerable.

Sifma. the securities industry lobbying group, argued that a fresh review of the SIP system is warranted because the last evaluation happened when trade executions were measured in entire seconds. Now, with trading reaction times calculated in millionths of a second, "the time is ripe for reconsidering how the SIPs are governed, controlled and operate under the Commission's oversight," said a representative from the trade group.

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