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Was Inadequate Testing the Cause of Nasdaq Software Crash?

By SiliconIndia   |   Tuesday, 22 May 2012, 06:10 Hrs
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Software testing is a critical phase in the life cycle of software development. With quality being a paramount concern for all, testers ensures that the software meets the quality standards which will be appreciated by the end user.



However, Software glitches do occur from time to time and it can result in various disappointments. Apart from personal dissatisfaction there could also be losses to various business organizations as in the case of the recent Nasdaq IPO which was kept under scrutiny after the shares of facebook were affected by the delay caused by a glitch in the software. Here is a brief elucidation of what had actually led to the glitch.



With over 80 business organizations affected, Nasdaq blamed the glitch on the poor designs which could have caused by improper or inadequate testing of the software that they use in the IPO. The computer systems were overloaded with updates and order cancellations as the Nasdaq’s software for the IPO permits investors to either cancel or update the order details until the auction begins. The requests received during the last 5 milliseconds before the auction created an imbalance in the process of buying and selling which later affected the program.



The trading algorithms in the first half, fed incorrect and out of date market data. NASDAQ reported that the issue "resulted in automated quotes in securities being posted at aberrant prices starting at 09:28:00. In many of these cases these quotes resulted in executions for participants. The application that controls these functions was updated and at 10:02:42 the system was normalized. NASDAQ has determined the root cause of the issue and has taken steps to avoid the likelihood of future occurrences."



Even after many hours of testing for different situations, the software used for the IPO did not work. Robert Greifeld, NASDAQ Chief Executive said "We then manually intercepted this cross. That manual intervention said we had to ignore the cancels that came in between the raindrops as we were processing the trade."



On seeing that both Bats and Nasdaq failed in an disgraceful manner, William Karsh, the former Chief Operating Officer at Direct Edge Holdings, an exchange operator that competes with Nasdaq said "It proves that technology isn't infallible.”


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