TECH TUESDAY is a weekly content series covering all aspects of capital markets technology. TECH TUESDAY is produced in collaboration with Nasdaq.
Just yesterday, Nasdaq marked the final step in the year-long migration of its MRX options exchange to the cloud, completing the third of three symbol migrations.
Moving to the cloud is a long-term trend in the options space, as the technology enables market operators to scale more efficiently, flexibly and securely in response to increasing capacity requirements.
Traders Magazine spoke with Greg Ferrari, Head of U.S. Options at Nasdaq, to learn more about the MRX migration in the context of the current options market.
Just last week, OCC reported that total options trading volume increased 4.8% year-to-date through November 30 — and 2021 was a record year for the industry. What was the setup for this very strong year, and how has Nasdaq managed?
2022 has been an incredible year for U.S. Options markets. But you must look back a few years to get a sense of how things have evolved and why we believe as the market infrastructure provider of choice, we are more prepared than ever for the increased adoption of options.
At the beginning of the pandemic in early 2020, markets were resilient and functioned incredibly well. But as an industry, we were beginning to set new peaks for daily message traffic, sometimes 3x as high as what we did the previous year. We needed to rapidly expand capacity to handle this new normal and do it quickly, ahead of the monumental fall 2020 election. Nasdaq made significant investments to immediately increase capacity, throughput and resiliency throughout our markets, and this ensured we remained the market operator of choice for our trusted partners and clients.
In 2021, market volumes expanded by 32%, driven by a new class of investors that looked to utilize options markets to express their views on markets. This healthy adoption was bolstered by increased investment in education and tools by retail brokers, and we found that our market infrastructure investment in the previous 12 months really paid off.
At Amazon Web Service (AWS) re:Invent 2021, Nasdaq announced it would migrate MRX, its first U.S. options market, onto AWS. What goals were set in migrating MRX to the cloud?
When our CEO and President Adena Friedman took the stage at AWS re:Invent 2021 on December 1, 2021, she identified three core pillars for our expansion of operating markets in the cloud:
- We want to be the first major market operator to define the technical and regulatory standards for how markets should operate in a cloud-based environment.
- We want to do this in phases so our clients can evolve alongside us.
- We need a partner to help us achieve our long-term goals for operating a flexible yet scalable environment without compromising the performance of the ultra-low latency systems we run on-prem today.
What has Nasdaq accomplished at the one-year mark? What has been achieved since the MRX migration began last month?
A year ago, Adena said we would reach our goal in 2022, and indeed we have worked tirelessly throughout this year to establish the MRX market to operate on AWS technology.
We conducted an elaborate testing plan with multiple user functionalities to ensure everything worked efficiently. This testing spanned a production simulation environment, three separate customer UATs (User Acceptance Tests) and a final confidence test. Then last month, we launched the re-platform symbol migration on a symbol-by-symbol basis. And we did all of this in close coordination with our customers.
What can we expect as MRX becomes the first Nasdaq exchange in the cloud?
At Nasdaq, we recognize that to successfully operate our markets, attract liquidity and manage unpredictable events, the underlying technology infrastructure for our matching engine needs to be hyper-scalable, ultra-resilient and highly performant with ultra-low latency. To that end, MRX, as a state-of-the-art, next-generation technology infrastructure developed in collaboration with AWS, will be more performant than the previous system, including 10% round-trip latency performance improvements.
What does the MRX migration mean for Nasdaq’s broader move to the cloud?
We will use the next few months to evaluate the system, learn from our customers and further expand this technology.
Nasdaq’s cloud journey will continue as we migrate additional exchanges to the cloud in 2023 and launch new service-based offerings (such as colocation-as-a-service). We are also leveraging our experiences with MRX to create a ‘market migration blueprint’ for moving workloads to the cloud with our market infrastructure technology customers, which comprise more than 130 market operators in 50 countries. We hope to use this blueprint to help the market technology community drive and accelerate transformation in their market ecosystems all over the world based on our combined technology capabilities, expertise and experience.
