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One year after Nasdaq migrated its MRX options exchange to the cloud, the firm moved the core system of its GEMX options exchange to Amazon Web Services (AWS).
The scale of the project was considerably more significant, as GEMX processes about 12 billion messages per day, 71% more than MRX.
“It’s a bigger market in terms of scale and messages processed,” Greg Ferrari, Vice President and Head of North American Exchange Trading at Nasdaq, told Traders Magazine. “The fee model itself is more National Best Bid and Offer (NBBO)-type quoting, which a lot of people compete to be on, and the system has demonstrated its ability to deliver the necessary throughput.”
The new cloud-enabled market infrastructure, which uses AWS Outposts, delivers up to a 10% improvement in latency and the ability to adjust capacity more seamlessly in response to changing market conditions, ultimately delivering a better trading experience for market participants. The GEMX migration is the third Nasdaq marketplace to move to AWS, following MRX in 2022 and the Nasdaq Bond Exchange (NBE) earlier this year.
Brass-tacks highlights of the GEMX migration include a condensed rollout within two Mondays, minimizing disruption for customers, and no temporary decline in market share, as often happens when a trading venue upgrades its technology. Big picture, it’s the latest step in Nasdaq’s multi-year project of moving its marketplaces to the cloud.
“Our commitment to the modernization of market services starts with our commitment to cloud-enabled infrastructure,” said Reekiran Kahlon, Senior Vice President of Market Platforms Technology at Nasdaq. “Leveraging the latest technology in our market system is important for us, and it is important for the industry.”
The cloud migration comes as about 40 million options contracts trade daily on average, up from 15 million in 2010. Current and foreseeable future industry growth is driven by an expanding product suite, primarily geared towards options with expirations of one week or even one day, with flexibility increasingly attracting traders and investors.
“Increased message traffic and the move towards shorter-dated options are trends which we see continuing for the next three to five years, and there is a need for investment-grade infrastructure to support that,” Ferrari said. “Cloud infrastructure provides a deterministic trading system with throughput and resiliency.”
Nasdaq plans to continue moving its options exchanges to the cloud, with an indicated timeline of one migration per year.
“The options market is always looking for the next level of performance and throughput,” Kahlon said. “So, it’s natural that we pick up an options exchange for a big system technology upgrade because options markets always require the cutting edge of technology.”
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