Nasdaq OMX Group is partnering with Carnegie Mellon University’s Software Engineering Institute as part of a plan to form an industry group dedicated to improving the quality of software testing.
“We hope to form and lead a group of market participants, regulators, technology providers, and academic institutions with the goal of driving resilience in the large scale software engineering and technology arena,” Eric Noll, Nasdaq’s head of transaction services in the U.S. and U.K., said in testimony before the Senate Banking Committee on Tuesday. “The industry has learned through experience that it must change the way we test.”
The announcement of the plan comes at the end of a bad year for industry software glitches. Nasdaq, Knight Capital Group, and BATS Global Markets all suffered high profile trading snafus this year that led to losses and consternation in the industry and Washington.
Nasdaq declined to offer details of the plan, but Noll’s remarks indicate that, going forward, the industry needs to adopt more vigorous testing. Rather than merely test to see whether a broker’s system works or that the exchange’s system can handle high volumes, the focus needs to be on pushing any software to the breaking point.
“A more robust testing environment would assume breakdowns by all testing participants to visualize the impact on a system’s integrity,” Noll said. “Such ‘destructive’ testing will spot troubles that the kindler-gentler testing of the past would not uncover.”
At the hearing, Joe Mecane, NYSE Euronext’s head of U.S. equities, agreed that change was needed. “Testing standards in the industry shouldn’t be too heavy handed,” he noted, “but we need best practices. We need some requirement for trading venues to have policies and procedures that address testing standards and how they roll out new code.”
Pittsburgh-based Carnegie Mellon’s Software Engineering Institute was established in 1984 by the U.S. Defense Department, and still gets the majority of its funding from the agency.
Among its recognized talents, SEI has established itself as an expert in Internet security. It was recently called in when Nasdaq’s systems were hacked, according to published reports. SEI also worked with the Bolsa Mexicana de Valores last year when it revamped its trading engine.
