The new system, dubbed SuperSOES, is designed to keep up with bigger and faster trades. It can process up to 999,999 shares at a time.
SuperSOES, which runs on hardware from Compaq Computer and Unisys, debuted Monday and began handling 18 stocks, including Agile Software and Liquid Audio. By July 30, the Nasdaq intends to completely implement the new system, which will replace its old SOES, or Small Order Execution System, which can handle only up to 1,000 shares at a time.
For the Nasdaq, the launch of SuperSOES, which is more than a year late, is one step toward unveiling a more high-octane trading engine called SuperMontage, due in 2002. The Nasdaq plans to become publicly traded and wants to highlight its technology, but it has come under fire lately as the exchange has had its fair share of glitches.
Two weeks ago, the Nasdaq's order-processing network, run by telecom company WorldCom, went down, and the stock market suspended trading from 11:31 a.m. PDT to 12:33 p.m. The Nasdaq then made a snap decision in 20 minutes to extend trading until 2 p.m. to compensate for the lost time, a move that got it into even more trouble with customers, some of whom weren't ready to stay open an extra hour.
That outage came just a day after the Nasdaq had problems entering price quotes for Microsoft after a trading halt. Stock exchanges have been straining under increased volume. The New York Stock Exchange also recently had an outage.
Those problems have prompted some skepticism about the Nasdaq's new system. Analysts noted that new technology usually doesn't work the first time.
"Technology hasn't been their strong suit," said Damon Kovelsky, an analyst at Meridien Research. He said the Nasdaq will have to prove its technology is reliable.
The company said the June 29 outage was a freak occurrence. "We look at it as such a unique and unlikely sequence of events," said Steven Randich, chief technology officer for the Nasdaq. Since 1982, the Nasdaq has had eight marketwide outages.
Dean Furbush, executive vice president of Nasdaq transaction services, said the new system is necessary to handle more volume and boost liquidity in the markets. "In 2001, everything is going faster," he said. "What we've seen in one day has given us confidence SuperSOES is working from a technological standpoint."
But despite the exchange's track record of 99.99 percent uptime, debuting a new trading system so shortly after outages creates some doubts. "Friday (June 29) is still on the back of people's minds," Kovelsky said. "That was a horrible event for the Nasdaq."
Kovelsky said Nasdaq customers may be wary of using SuperSOES right out of the gate. Glitches are a concern, but many customers may not be ready to change their trading systems.
Executives at Island ECN, an electronic communications network that delivers after-hours trades and is a Nasdaq customer, said SuperSOES will be good for the market, and therefore good for it. "But the Nasdaq has some sales job to do here," said Island Executive Vice President Andrew Goldman.
To combat worries about the Nasdaq's new trading system, the exchange has been planning for "Greenspan events," which occur when Federal Reserve Chairman Alan Greenspan tweaks interest rates, causing trading volume to spike.
The Nasdaq's peak trading days--during which orders can come in around 234 per second--are the ones when Greenspan makes an interest-rate change.
"SuperSOES currently meets or exceeds peak 'Greenspan events' projections through 2003," Randich said.