Exclusive Online Only ContentTesting Leads to Glitch at Nasdaq OMX PHLX
October 16, 2009
The first round of scripted testing by U.S. options exchanges to see whether they could adapt to new ticker symbols for options caused incorrect strike prices to be send out by Nasdaq OMX PHLX on Oct. 12 , according to a letter sent by the Options Price Reporting Authority two days later.
On Oct. 14, OPRA sent a memo to its market data customers saying that on Columbus Day, one of the Nasdaq OMX PHLX ’s applications still had a valid new code for options embedded in its operations. That meant that “all disseminated quotes were sent with an invalid strike code,” said the letter signed by Joseph Corrigan, executive director for OPRA.
The valid new code refers to a 21-character options nomenclature which will be introduced by the U.S. options exchanges beginning February 2010. The current three-to-five character codes will be completely eliminated in May.
In his letter, Corrigan said that the problem was resolved by the PHLX at 9:40:52EST that same day. That is about ten minutes after options trading opens.
“Nasdaq OMX PHLX regrets any inconvenience this may have caused,” wrote Corrigan without elaborating. OPRA is responsible for sending out price feeds on options to members of the options exchanges. Corrigan declined to comment on the matter and referred calls to Walt Smith, vice president at the Nasdaq OMX PHLX
Jim Binder, a spokesman for the Options Clearing Corporation, the Chicago-based clearinghouse for U.S. options which coordinated the testing, declined to comment on the Nasdaq OMX PHLX glitch. “The OPRA letter refers to a post-test operational issue at one of the participant exchanges,” he wrote in an email to Securities Industry News.
The OPRA has previously said that it will switch to a condensed version of the new code comprising 17 characters. Firms using OPRA feeds to support their trading, analytics and pricing applications will need to convert those symbols to both the OCC codes and separate proprietary identification codes.
Data management experts familiar with options symbology believe that Nasdaq OMX PHLX failed to shut down testing over the weekend when trading began on Monday. That would mean no longer using new options test symbols. Securities Industry News could not determine whether any of the Nasdaq OMX PHLX ’s members suffered any financial losses as the result of the data glitch.
According to the OCC’s 32-page scripted industry test reference guide reviewed by Securities Industry News, the October 10 test represented Phase One testing of the new options symbols.
“The testing simulates the February 12, 2010 implementation. All testing will be in an environment absent OPRA codes and equity strike prices will be converted from fractional representation to decimal representation,” said the document, dated Oct 12.
The document said that for scripted industry testing five of the seven options exchanges would be using their production environments. The five included the Nasdaq OMX PHLX . The document also said that the Nasdaq OMX’s testing began at 7AM ET on Oct 10 with connectivity established with its member firms.
The testing ended at 2PM ET on that day when Nasdaq OMX PHLX sent matched trades to the OCC for clearing and quotes and trades to OPRA for dissemination.
The OCC plans additional testing on November 14, December 12 and January 9, 2010 to help the options exchanges prepare for the new symbology.
