Nasdaq has launched an algorithmic trading testing facility for clients to allow them to test their trading infrastructures in a "live" environment.
It has brought in Thesys Technologies, the infrastructure affiliate of Tradeworx, to help set up its Algo Test Facility, which will eventually simulate trading on all major US equity exchanges.
According to Nasdaq, electronic trading customers will be able to "rigorously examine algorithmic strategies by replaying and interacting with real historical market data”.
It said that the test facility will "allow market participants to simulate their automated trading strategies against real-world scenarios, transactions and competitors, to manage their risk exposure and their capital expenditure”.
The facility is expected to launch in the first quarter of 2014.
The testing bed will allow traders to test the quality of quote processing, order handling and the interaction of a trading algorithm with the market microstructure.
Nasdaq said its facility will provide traders with valuable insights about risk and performance, including the ability to evaluate the cost of an "adverse selection of specific trading strategies".
Eric Noll, executive vice president of transaction services for the US and UK at Nasdaq OMX, said: "The Algo Testing Facility is another way Nasdaq OMX is integrating sophisticated technology solutions as a means for participants to reduce risk exposure in a constantly evolving electronic marketplace and regulatory landscape."
It will be accessible through the Nasdaq OMX data centre, enabling customers to use their existing trading infrastructure, including risk systems, OMS and feed handlers.
The first phase of the facility will include simulations for the Nasdaq stock market, and over time, said Nasdaq, the test system plans to support all major US equities exchanges along with their order types and protocols, so users can interact with the historical orders of other market participants.
US stock exchanges recently agreed to measures intended to improve the resiliency of critical trading systems following a recent three hour Nasdaq outage, including introducing a “kill switch” to enable trading to be shut down in the event of a technology failure.