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

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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