As officials at the NYSE Euronext declared its weekend testing of a simulated Twitter IPO a success from an operational standpoint, exchanges must prove that they can handle new stock offerings as well as day-to-day operations in the wake of recent trading technology glitches.
NYSE took the unusual step of testing Twitters initial public offering on Saturday, October 26 in order to avoid the technical glitches that plagued the launch of Facebooks IPO on the Nasdaq OMX exchange in 2012. The much-anticipated Twitter IPO is rumored to go live in November.
Saturdays systems test was successful, and were grateful to all the firms that chose to participate. We are being very methodical in our planning for Twitters IPO, and are working together with the industry to ensure a world class experience for Twitter, retail investors and all market participants, said a NYSE spokesman via e-mail.
The spokesman declined to name any firms that participated in the tests but an anonymous source said that all major firms and others participated in the testing.
[Check out the details of the NYSE Twitter IPO Testing.]
Although the NYSE routinely performs testing on weekends, the Twitter IPO simulation was a rare event for the exchange.
This is the first time Robert Stowsky, senior analyst for Aite Group, heard of an exchange testing a forthcoming IPO. Exchanges usually do lode testing over the weekend but maybe they were grabbing a headline to say that were doing a test of the IPO, he told Traders Magazine.
If it was an end-to-end test youd have the market makers involved, he added.
Are Glitches the New Normal?
Should traders and industry observers get used to the glitches and outages that plagued Nasdaq for three-hours one day last August? To be fair, Nasdaq is not the only major player to experience a technology outage. BATS suffered a technology outage in August as did investment firm giant Goldman Sachs which saw its trading cease for a number of hours the same month. The investment firm reportedly placed four IT workers on unpaid leave after the IT mishap.
Have we gotten to the point where firms are taking testing more seriously? Maybe well start seeing fewer and fewer outages and maybe we have reached the peak where we have all of these things we didnt think about or have ignored are now happening and we have to test them, said Stowsky.
Regulators are keeping a close eye on the recent spate of technology glitches and have stepped in with fines and new rule proposals. Nasdaq was fined $10 million for its Facebook IPO faceplant — a record fine for an exchange, according to Reuters — and had to pay out more than $41 million to market participants who lost money. Now you have regulators getting involved and a lot of the proposed Reg SCIs concept release is around software testing and quality assurance. Even the latest MiFID II proposals focus on the fact that your system cannot disrupt the market, said Stowsky.
He added, The regulators are saying you will pay heavy fines if you disrupt the system.
Check out what the SEC’s Mary Jo White’s warning to firms about their IT.
