TECH TUESDAY: Options Market Technology in Focus

TECH TUESDAY is a weekly content series that covers all aspects of capital markets technology. TECH TUESDAY is produced in collaboration with Nasdaq.

Greg Ferrari, Vice President and Head of U.S. Options at Nasdaq, spoke at the Options Industry Conference held May 10-12 in San Antonio.

Traders Magazine caught up with Greg to learn about the current landscape for options technology, innovation in the industry, and how Nasdaq stays at the technological forefront. 

What are the primary latest developments in options trading technology, from an industry standpoint?

Greg Ferrari, Nasdaq

Nasdaq runs high throughput, low latency, scalable and highly secure systems to facilitate the price discovery and risk transfer process between buyers and sellers of option contracts. We’re laser focused on processing quotes and orders as efficiently as possible to deliver a high-quality experience for liquidity seeking participants. 

It is a very competitive marketplace where Options market makers quote on 16 exchanges in over 1.5 million series, so their responsibility to provide continuity of service to the market cannot be overstated. 

Where is the innovation coming from within the options market ecosystem?

There’s a host of innovations taking place that the options industry benefits from. For example, we recently announced a partnership with AWS and Equinix to expand our current footprint within our Carteret, New Jersey data center. To that end, we are working towards the next phase of this journey by bringing Nasdaq MRX, one of our six U.S. options exchanges, onto this enhanced infrastructure. Alignment with our strategic partners will enable us to bring the cloud directly to our clients in the data center, as well as allows us to offer more choice to clients and greater control over consumption of services, with immediate capacity at scale.

There is also constant innovation at the broker-dealer and technology partner level to make workflows more efficient, as well as more modern regulation that is being adopted to work with these new technologies. 

What were some technology themes discussed at this year’s OIC?

One theme was resiliency and the ongoing investment in professional grade infrastructure to support the increased demand for options from retail and institutional investors.

At Nasdaq, we’re producing north of 80 billion messages across our six options markets in a normal day in 2022. To support this growth, we must constantly invest in infrastructure – resiliency and capacity go hand in hand for us.   

This investment touches all aspects of the order and quote processing infrastructure, not just the matching engine component. For instance, the surrounding systems that are used for market surveillance also have been upgraded to ensure that the regulatory programs are able to perform so that we can continue to operate fair and orderly markets. The “belts and suspenders” that power the markets are constantly being evaluated and upgraded to satisfy our clients, our partners, and our regulators to meet the future needs of the market.