Online Data Storage in Today's Markets: How Information Technology Is Shaping Stock Exchanges
December 21, 2013
•IADT General, Information Technology
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In a globalized economy, one of the key determinants of competitiveness and growth is information technology. One of the industries in which this is clearly vital is the stock market. Stock exchanges provide facilities for companies to float their shares, pay income and dividends as well as issue and redeem securities. All financial transactions involve the exchange of information, so online data storage has become a crucial component of the stock market infrastructure.
Students of information technology and software engineering are in a unique position to benefit from the stock market's reliance on IT in two ways: by investing directly in companies that trade on the stock exchanges, and by pursuing careers with the various exchanges to manage the challenges that come with the trading platforms.
The Need for Effective Data Management Systems
Despite technological advances in information systems, electronic data storage remains a challenge. The biggest threat comes from the hacker community, whose activities could potentially encroach on trading platforms and cripple electronic transactions. Each of the stock exchanges — the National Association of Securities Dealers Automated Quotations (Nasdaq), the New York Stock Exchange (NYSE) and Archipelago — has gone through its fair share of problems relating to electronic data storage and backup.
- Nasdaq has suffered from a number of glitches in its electronic data systems, the most recent ones occurring in August and September 2013. In August, the exchange halted trading for three hours due to internal software issues. The September glitch was similar, though less severe.
- The latest glitch in the electronic data systems of the NYSE took place in November 2013, just hours before the initial public offering of Twitter, Inc. The data malfunction led to mislabeling of stocks on the main data feed.
- Unlike other stock exchanges, Archipelago has not had any data issues recently. Archipelago has only been around for seven years, but had to deal with its fair share of data problems before dumping the direct attached storage (DAS) technology it was initially using.
Expansion of electronic data is a reality that exchanges must deal with. Just like hard storage media, electronic records need to be kept for lengthy periods of time, and be easily accessed when need arises.
Are the stock markets safe from cyber attacks? More importantly, are investors assured that their portfolios are intact when an attack or failure occurs?
Exchanges have been progressively migrating to electronic platforms so that trades are executed by complex algorithms, not human traders. The automated stock system can process millions of shares in minutes, and the superfast computers can trade a stock in a millionth of a second. But obviously there is a security risk involved. To address these, the exchanges have taken a number of measures including the operation of multiple data feed systems to avoid the halts that occur when the single point system crashes. Traditional rivals NYSE and Nasdaq have been in talks to link their feeds so that traders can use one feed if the other one fails, in a bid to streamline online data storage and overall information management.
Data management has a major impact on the administration of the exchanges through reporting and surveillance activity, allowing regulators to assess the adequacy of any regulatory measures in place and check for loopholes that may potentially put the system at risk. As the stock exchange infrastructure grows more sophisticated and becomes more automated, experts in information technology and software engineering will be in demand to develop and maintain the computer technology and shape the future of these evolving intelligent markets.
Photo credit: Wikimedia Commons.