"Suspicious" Problems with London Stock Exchange's New Trading System

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The drama at the intersection of Big Data and Big Money continues. The hoary London Stock Exchange is trying to keep pace with alternative trading platforms by rolling out a new system for high-frequency traders. Unfortunately, it's having trouble. Yesterday, trading was disrupted for two hours when the platform, known as Turquoise, encountered problems.

A preliminary investigation revealed that the issues were caused by "a human error" that "may have occurred in suspicious circumstances." No more details are available, and that statement is impossible to parse, but the upshot is that further planned whizbang upgrades to serve the needs of data-driven traders have been postponed.

The strange circumstances highlight an undercovered trend in the financial markets: the proliferation of alternative exchanges that cater to high-frequency traders. For example, pop quiz: what's the third largest equity market? The answer is BATS, which didn't exist in 2004.

The old-boys -- the LSE and NYSE -- have been steadily losing market share to these upstarts. To defend their competitive positions, they've been trying to keep up technologically, but it's not easy to deliver ultra-low latency and high-throughput trading, particularly when the incentives for disrupting the system are so large.

Via IEEE Spectrum.

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Alexis C. Madrigal

Alexis Madrigal is the deputy editor of TheAtlantic.com. He's the author of Powering the Dream: The History and Promise of Green Technology. More

The New York Observer has called Madrigal "for all intents and purposes, the perfect modern reporter." He co-founded Longshot magazine, a high-speed media experiment that garnered attention from The New York Times, The Wall Street Journal, and the BBC. While at Wired.com, he built Wired Science into one of the most popular blogs in the world. The site was nominated for best magazine blog by the MPA and best science Web site in the 2009 Webby Awards. He also co-founded Haiti ReWired, a groundbreaking community dedicated to the discussion of technology, infrastructure, and the future of Haiti.

He's spoken at Stanford, CalTech, Berkeley, SXSW, E3, and the National Renewable Energy Laboratory, and his writing was anthologized in Best Technology Writing 2010 (Yale University Press).

Madrigal is a visiting scholar at the University of California at Berkeley's Office for the History of Science and Technology. Born in Mexico City, he grew up in the exurbs north of Portland, Oregon, and now lives in Oakland.

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