Nasdaq market hit by three hour shutdown

Updated: Friday, 23 Aug 2013 07:07

Trading in thousands of US stocks ground to a halt for much of yesterday after an unexplained technological problem shut down trading in Nasdaq securities.

The incident was the latest prominent disruption to the operations of US markets.

Nasdaq resumed trading after a three hour, 11-minute shutdown of trading in such familiar names as Apple, Facebook, Google , Microsoft Corp and about 3,200 other companies.

The shutdown was the longest in recent memory, and prompted US Securities and Exchange Commission Chair Mary Jo White to call for a meeting of Wall Street leaders to help insure the "continuous and orderly" functioning of securities markets.

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Nasdaq's parent Nasdaq OMX Group said it halted trading after learning that the Securities Information Processor, or SIP, which consolidates stock prices, was not disseminating price quotations.

It said a "connectivity issue" between an unnamed exchange participant and the SIP caused the breakdown, and that the cause has been "identified and addressed."

Nasdaq also said technical issues were resolved within 30 minutes and that it worked with other exchanges, regulators and market participants to ensure an orderly resumption of trading.

"NASDAQ OMX will work with other exchanges that are members of the SIP to investigate the issues of today, and we will support any necessary steps to enhance the platform," it said.

During the shutdown, trading of shares not listed on Nasdaq continued, but transactions could not be executed on the Nasdaq platform. Options trading was also halted.

After broader trading resumed, some difficulties persisted, and Nasdaq said it stopped routing orders to the New York Stock Exchange's all-electronic ARCA platform shortly after the resumption.

Nasdaq's own stock, which was up 0.8% before the halt, closed down 3.4%, after earlier trading down as much as 5.4%. Meanwhile, the Nasdaq index itself closed up 1.1%, higher than where it was before the halt.

During the shutdown, Nasdaq sent a series of alerts advising clients and traders about the scope of the outage, and later, its plans to resume trading.

Wall Street banks spent the period translating the messages to clients, who were at first panicked, and later frustrated, over how and whether their trades would be processed. Three sources at banks and brokerages who declined to be identified said trading desks were advising Nasdaq not to rush to reopen, fearing that further technical errors could sap even more confidence from rattled markets.

White House spokesman Josh Earnest said President Barack Obama had been briefed about the disruption.

The outage was the latest setback for Nasdaq, which in May agreed to pay $10m, the largest penalty ever against a stock exchange, to settle SEC civil charges over its mishandling of Facebook's initial public offering.

Yesterday's outage was the latest high-profile glitch in US stock markets. On Tuesday, a technical problem at Goldman Sachs Group resulted in a flood of erroneous orders in U.S. equity options markets. Two weeks earlier, on August 6, stock exchange operator BATS Global Markets faced a nearly hour-long outage.

Meanwhile, a 2012 trading blowup at Knight Capital Group was a contributing factor to the eventual sale of that company.

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