Success story




The Nasdaq Stock Market, Inc.
HP NonStop servers keep the electronic marketplace up and running


      ...
at Nasdaq, up to 70 different Market Makers put up their capital to trade that stock
every day. As a result, we see except...
based on its availability, and we continue to migrate to newer, faster NonStop servers
as they are developed. We can’t aff...
Nasdaq will need the extra capacity to handle the trading boom that’s on the horizon.
                                    ...
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The Nasdaq Stock Market, Inc.

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The Nasdaq Stock Market, Inc.

  1. 1. Success story The Nasdaq Stock Market, Inc. HP NonStop servers keep the electronic marketplace up and running Benefits • Delivers continuous availability to help meet business-critical objectives • Scales to provide capacity for exploding market volume • Allows online cloning of software processes for active load balancing Back in 1971, an aggressive upstart called the National Association of Securities Dealers Automated Quotation System (or “Nasdaq,” for short) dared to challenge the traditional stock exchanges with an automated, electronic marketplace for securities trading. Nasdaq started out by specializing in small, high-risk companies that could not meet the strict listing criteria of the established exchanges, bringing much-needed order to the growing market in over-the-counter stocks. Today, The Nasdaq Stock Market, as it’s now known, handles an average of 1 billion shares a day and is the fastest-growing equities market in the world. Other one-time upstarts—companies like Intel, Microsoft, Cisco, 3Com, and MCI WorldCom—continue to list their stocks on Nasdaq, where they “grew up.” Nasdaq relies on HP NonStop servers for the core execution, reporting, comparison, and switching functions that keep its innovative electronic marketplace up and running. Core applications run on NonStop servers The Nasdaq Stock Market lists over 5,500 issues. It handles 550,000 trades on an average day, or roughly 1 billion shares. More than 7,000 members—ranging from small, independent broker/dealers with fewer than 10 employees to large, full-service broker/dealers with an international presence—access its system for quotes and trade executions. It serves a market that is growing at 35 percent a year, with online trading and a robust economy fueling an explosion in investor participation. With this kind of volume and responsibility, Nasdaq has to be nimble. And it has to be tough. The “nimble” part is built right into Nasdaq’s business structure, and it’s an attribute that clearly differentiates it from the more traditional, specialist-based stock exchanges. “In a specialist system, one individual is responsible for trading a particular stock,” explains John Hickey, Nasdaq’s executive vice president and chief technology officer. “But here 1
  2. 2. at Nasdaq, up to 70 different Market Makers put up their capital to trade that stock every day. As a result, we see exceptionally high liquidity in our marketplace.” For the “tough” part, Nasdaq relies heavily on its powerful NonStop K- and S-series systems—a total of 356 processors, including a growing contingent of NonStop S72000 servers. Every time a member accesses the Nasdaq system to obtain a quote or place a trade order, for example, the request is routed to the appropriate application by a NonStop server. The Small Order Execution and SelectNet systems also run on NonStop servers. “The Small Order Execution System allows a trader to execute against the best price in the market on any issue, up to 1,000 shares, just by making a simple terminal entry,” Hickey explains. “The order executes automatically and in real time.” For larger trades, the online screen negotiation and execution service, SelectNet, allows traders to specify number of shares, interest in partial orders, and willingness to negotiate. Nasdaq uses NonStop servers for another very important application as well. Whenever a trade comes into the market, the system performs an online comparison to ensure that both parties have entered the correct information. If there is a discrepancy— referred to as a “broken trade”—the parties are notified immediately. “Under normal circumstances, they would not know the trade was broken until it had cleared through the National Securities Clearing Corporation, which happens overnight,” explains Hickey. “With our system, they can get on the phone and resolve the problem right away.” The Nasdaq Stock Market solution Nasdaq utilizes a total of 326 HP NonStop processors—shared between the company’s Connecticut-based production site and a backup site in Maryland— to keep its electronic marketplace up and running. When quotation requests or trade orders come into the Nasdaq system, they are switched to the appropriate application systems by a 12-processor NonStop K20000 server. A second switch is being implemented on a NonStop S72000 server to handle the growing traffic volume. The Small Order Execution System and the SelectNet system also run on NonStop S-series servers (including the NonStop S72000 server), as do the online trade comparison and reporting applications. Availability and scalability are key requirements Downtime at Nasdaq is unthinkable. “If you were in the middle of a 10,000-lot trade of Microsoft stock, for example, and you had a complete outage—with the market continuing to go up or down—the exposure would be huge,” says Hickey. “I couldn’t even begin to tell you what the cost of that downtime would be. It’s virtually immeasurable.” This, he adds, is why Nasdaq goes to such lengths to make sure it can provide a continuously available market. The key to providing such a market, according to Hickey, lies in the availability and scalability of the NonStop servers. “Our execution systems must be available at all times, as long as the market is up,” he says. “We chose this platform back in 1982 2
  3. 3. based on its availability, and we continue to migrate to newer, faster NonStop servers as they are developed. We can’t afford any downtime.” Nasdaq measures availability the same way HP does—at the application level. “We multiply the total number of seconds in the trading day by the 7,000 terminals that are out there doing trades,” explains Hickey. “If a trader experiences downtime for whatever reason, it detracts from our overall customer availability. They don’t care if our machines are up 99.999 percent—they just want to know that the system was available to them during the market hours.” All parts of the system are included in the calculation, from the trading terminals to the network to the HP servers. “Our 1998 goal for the entire system was 99.75 percent, and we performed at 99.86,” notes Hickey. “Our goal in 1999 was 99.80 percent. I believe we can continue to improve on that number.” Even on Nasdaq’s busiest trading day ever—April 14, 1999, when more than 1.4 billion shares were traded—the NonStop servers continued to perform flawlessly. Scalability is equally critical to Nasdaq, according to Hickey, who notes that his biggest ongoing challenge is ensuring adequate capacity to meet the growing market requirements. “One of the beauties of the NonStop servers is that we can expand the system linearly, which allows us to grow against the need,” he says. “It’s been absolutely wonderful for us in terms of meeting our mission-critical objectives.” Hickey adds that the ability to clone software processes to remedy uneven growth in different areas is extremely valuable to Nasdaq. “This is important when you’re balancing systems,” he says, “especially when the arrival rate of broker/dealer transactions is so unpredictable.” Familiarity breeds … respect Eighteen years is a long time. That’s how long Nasdaq has been running its core messaging, trading, and reporting applications on NonStop systems. “We kind of take it for granted that the equipment won’t go down,” says John Hickey, Nasdaq’s executive vice president and chief technology officer. “As far as I’m concerned, there is no other large computer platform that can handle the execution requirements of the Nasdaq system. The performance of the NonStop servers is outstanding.” Hickey also appreciates HP world-class support services. “We have a very good strategic partnership with HP,” he says. “The HP people on site are as dedicated as our permanent employees, and they’re part of the family. Their support has been—and continues to be—excellent.” Technology growth at The Nasdaq Stock Market Today, some 20 applications—containing over 2 million lines of code—run on the NonStop servers installed at Nasdaq. But those figures will change soon. “We’re adding new systems as we speak,” explains Hickey. “For one thing, we acquired the American Stock Exchange and will be developing what we call an ‘Amex Book.’ This new development will be on NonStop servers. We will be expanding the number of processors we have and the number of applications that are supported, and the lines of code will probably increase by around 20 percent.” 3
  4. 4. Nasdaq will need the extra capacity to handle the trading boom that’s on the horizon. The company is already provisioning its technology centers for a 2-billion-share day, and it expects to double that capacity within two years. “Longer term, we are planning for an 8-billion-share day,” says Hickey. “And we are confident that HP—and the NonStop servers—can grow in these orders of magnitude.” © Copyright 2003, 2000 Hewlett-Packard Development Company, L.P. The information contained herein is subject to change without notice. The only warranties for HP products and services are set forth in the express warranty statements accompanying such products and services. Nothing herein should be construed as constituting an additional warranty. HP shall not be liable for technical or editorial errors or omissions contained herein. For more information, go to www.hp.com/go/nonstop. 4

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