(Bloomberg) — Nasdaq OMX Group Inc. won the right to keep running a key piece of trading infrastructure for thousands of U.S. stocks including Apple Inc.
The committee overseeing the securities information processor, or SIP, as the system for distributing Nasdaq stock prices is known, selected the exchange operator over Tradeworx Inc.s Thesys Technologies LLC division, according to a person with knowledge of the matter, who said the vote was unanimous. Previous votes had seen members split between the two bids.
As part of its new mandate, Nasdaq will create a subsidiary to manage the SIP, move the processor to the technology that runs its exchanges, and maintain a live back-up system, according to a statement. Financial terms werent disclosed.
We had strong competition during the RFP process, which resulted in our ability to contract for both improved technology and a more attractive commercial solution, Thomas Knorring, a CBOE Holdings Inc. executive whos the chairman of the group, said in a statement. The changes mean the SIP is now well- positioned for future success.
Breakdowns in the SIP can hobble the $24 trillion U.S. stock market, as was the case in August 2013 when a malfunction at Nasdaq halted trading in Apple, Google Inc. and thousands of other stocks for three hours. Nasdaq has upgraded the SIP, speeding it up amid Securities and Exchange Commission Chair Mary Jo Whites demand that the industry make systems more reliable.
Primary Means
The thousands of companies listed on Nasdaq trade on more than 50 venues in the U.S. The SIP helps tie that network together, serving as the primary means of informing the public about the current price of a stock. Intercontinental Exchange Inc.s NYSE Group Inc. runs the only other stock exchanges that companies can call home in the U.S., and prices for those stocks are disseminated by another SIP. Both the Nasdaq and NYSE systems are overseen by a committee of representatives from exchanges.
Nasdaq has sped up the SIP. The average latency, or reaction time, of the data feed improved to 590 microseconds for quotes and 720 microseconds for trades in the second quarter, according to the latest U.S. Consolidated Tape Data report. That compares with 1,160 microseconds and 1,310 microseconds, respectively, in the first quarter. There are 1 million microseconds in a second.
NYSEs SIP operated with delays of 410 microseconds for quotes and 550 microseconds for trades in the second quarter, according to data compiled by the Consolidated Tape Association.
As part of todays agreement, Nasdaq has said it will continue to reduce the feeds latency.
Earlier Stalemate
Wednesday’s vote was the latest in a series after earlier attempts to determine a winner ended in stalemate. Ten of the committees 15 votes were required to choose a victor. Bats Global Markets Inc., which had previously favored Thesys, had four votes, while Nasdaq and NYSE had three votes apiece, reflecting the number of stock exchanges each company operates.
Tradeworx already provides an important piece of stock market technology. The SECs market surveillance program, Midas, is based on technology acquired from Tradeworx. Midas, an acronym for Market Information Data Analytics System, collects about 1 billion trading records per day from U.S. equity exchanges, giving the regulator more complete data than traders and researchers can see from the public feeds.
We are disappointed that we didnt win, but I guess the committee members had their reasons, Manoj Narang, chief executive officer of Tradeworx, said by phone after the vote.
