Nasdaq moves second matching engine to AWS cloud

Nasdaq has completed the migration of its Nasdaq Bond Exchange to Amazon Web Services’ cloud, marking the second Nasdaq marketplace to move matching engines to the cloud.

Nasdaq is in the process of migrating all its markets, as well as its market data and back-office and clearing operations to the cloud over a 10-year period, as part of an agreement signed between the exchange and AWS in November 2021, starting with its MRX options market last December. The Bond Exchange went live on August 21, and will be followed by its GemX options market (the former ISE Gemini exchange platform), which is on track to migrate later this year.

The Nasdaq Bond Exchange lists non-convertible bonds issued by more than 100 publicly traded companies. Its migration uses the same cloud infrastructure developed by AWS and hosted in Nasdaq’s datacenter within the Equinix facility at 1400 Federal Boulevard in Carteret, New Jersey, that already supports MRX.

Nasdaq officials were unavailable for comment, but a spokesperson confirms that last week “we completed the migration of Nasdaq Bond Exchange onto the AWS cloud as a part of Nasdaq’s ongoing market modernization efforts.”

“Following our successful migration of the first US options market (MRX) to the cloud last year, we continue to build on and leverage the Outpost edge computing solution we developed with AWS to support the cloud transformation of the capital markets ecosystem,” the spokesperson adds.

The solution referred to by the spokesperson required the construction of a new data hall last year at the Equinix facility to house the AWS Outposts servers that would run Nasdaq’s new cloud presence. On its first day live on Outposts, MRX processed 4.2 billion messages and achieved a 10% improvement in roundtrip latency as a result—Nasdaq describes MRX’s resulting latency as “low double-digit microseconds,” but declines to provide specific latency figures.

AWS Outposts weren’t originally developed with the needs of exchange operators in mind. The service—which allows users to deploy racks of AWS servers in their own facilities or a co-location environment—was designed to serve use cases in various industries, including healthcare, media and entertainment, telecommunications, and other areas of financial services. For example, for media companies it can reduce latency in the editing process of movies. Media companies in Los Angeles asked AWS to build out an AWS region in the city, but building a full region in such a big metro area was a non-starter. So instead, AWS developed Local Zones—scaled-down versions of a region that could offer essential services required by specific industries in a geography. Part of the extended Equinix facility in Carteret includes a Local Zone that will be operated by Nasdaq.

Further tailoring the service to meet the demands of an exchange involved the participation of both parties. Nasdaq and AWS have worked together for 15 years, starting in 2008 with AWS hosting Nadsaq’s Market Replay service.

Being able to match and exceed Nasdaq’s existing latency was a key factor in proving that a cloud option could deliver the performance required by a modern exchange operator. To achieve the latency required by an exchange market, AWS tuned the hardware of an Outpost, while Nasdaq optimized its software.

“We knew in 2019 that the software would work on AWS. That doesn’t mean anything unless it can meet the latency profile needed to support trading in a venue Nasdaq operates,” Scott Mullins, managing director of worldwide financial services at AWS, tells WatersTechnology. “We worked together over the next two years on what goes into the Outpost rack, making adjustments and updates to shave off bits of latency over time.”