News / Economy

NASDAQ Paralyzed by 3-hour Shutdown

Electronic billboards reflected in the windows of NASDAQ in New York, Aug. 22, 2013.
Electronic billboards reflected in the windows of NASDAQ in New York, Aug. 22, 2013.
Reuters
Trading in a large part of the U.S. stock market came to a halt for much of Thursday after an unexplained issue shut down trading of NASDAQ-listed securities, the latest black eye for the U.S. securities trading business.
 
The abrupt halt shortly after noon caused trading in shares of Apple, Google, Microsoft and more than 3,000 other U.S. companies to stop.
 
NASDAQ resumed trading at around 3:25 p.m. EDT (1925 GMT), ending a roughly 3-hour, 11-minute shutdown that was the longest in recent memory.
 
“Any brokerage firm gets paid by executing orders,” said Sal Arnuk, co-head of equity trading at Themis Trading in Chatham, New Jersey. “So yes, we are frustrated, and this hurts us, it hurts the market and it hurts public confidence.”
 
All traffic through NASDAQ had stopped at 12:14:03 p.m. (1614 GMT), and the exchange and its larger rival, NYSE Euronext's New York Stock Exchange, said all trades executed between then and 12:23:31 p.m. would stand.
 
Trading in a single stock resumed at about 3 p.m., and other stocks followed. NASDAQ's own stock, which had been up 0.8 percent prior to the halt, traded down as much as 5.4 percent after trading resumed.
 
NASDAQ blamed a problem with distributing stock price quotes for the shutdown. A source familiar with the matter described the problem as a “data feed issue.”
 
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.
 
“I can't remember this happening in recent memory,” said Christopher Nagy, president of consultancy firm KOR Trading and a former head of trading at TD Ameritrade.
 
The U.S. Securities and Exchange Commission said it was in touch with the exchanges, with Chairman Mary Jo White overseeing developments from her home office near New York City.
 
White House spokesman Josh Earnest said President Barack Obama had also been briefed about the disruption.
 
The interruption means that investors had very limited  market access to trade such familiar names as Apple Inc , Facebook Inc, Google Inc and Microsoft Corp. In all, NASDAQ lists about 3,200 shares.
 
“As we continue to eliminate human beings from the execution of security trading, this is the problem you run into,” said Stephen Massocca, managing director of Wedbush Equity Management LLC in San Francisco. “These events are going to take place, given the level of automation.”
 
Technical Glitches

The outage was the latest black eye for NASDAQ, which in May agreed to pay $10 million, the largest penalty ever levied against a stock exchange, to settle SEC civil charges over mistakes in handling the Facebook IPO.
 
James Angel, a Georgetown University finance professor who also sits on the board of rival exchange operator Direct Edge, said NASDAQ appeared to take steps to ensure that trading reopen in an orderly fashion and with correct pricing.
 
“We can live with the market being closed for a little bit, but we can't live with bad pricing,” he said. “It's far better to have the market shut down and take its time re-opening, than to have what happened with the Facebook incident... It looks like they've learned their lesson.”
 
William Lefkowitz, options strategist at National Securities in New York, said options trading in such companies as International Business Machines Corp dried up during the halt. But he said the reopening was “very orderly and liquidity is back to normal. It is almost like it did not happen.”
 
Thursday's outage was the latest high-profile glitch in U.S. stock markets.
 
On Tuesday, a technical problem at Goldman Sachs Group Inc resulted in a flood of erroneous orders being sent to U.S. equity options markets.
 
Two weeks earlier, on Aug. 6, stock exchange operator BATS Global Markets was hit with a nearly hour-long outage.
 
Last year, a trading blowup at Knight Capital Group Inc was a contributing factor to the eventual sale of that company.
 
“The frequency of technical issues affecting trading is a wake-up call to business leaders in capital markets,” said Lev Lesokhin, executive vice president of Cast, a specialist in business software analysis. “They need to carefully scrutinize the structural integrity of their software systems.”
 
Other trading venues were also affected by Thursday's outage, and several “dark pools,” which execute orders anonymously, were forced to stop trading, according to several market participants.
 
SEC
 
Thursday's outage could cause problems for NASDAQ at the SEC, which has recently cracked down on stock exchanges to beef up their compliance with regulations and make sure they are policing themselves.
 
White, who joined the regulator in April, is a NASDAQ veteran, having served on its board as recently as 2006.
 
In June, a month after NASDAQ settled with the SEC over Facebook, the Chicago Board Options Exchange was ordered to pay $6 million to settle SEC charges that it failed to properly enforce short sale rules.
 
The NYSE last year became the first exchange in SEC history to face a financial penalty after it supposedly gave some customers an “improper head start” on trading information.
 
In March, the SEC proposed rules to require exchanges and other trading platforms to be better prepared to handle major market disruptions, including those caused by technology glitches. Those reforms are still out for public comment.

You May Like

US Firms Concerned About China's New Cyber Regulations

New rules would require technology companies doing business in financial sector to hand over their source code, adopt Chinese encryption algorithms More

WHO Focus on Ebola Shifts to Ending Outbreak

Focus to be less on building facilities and more on efforts to find infected people, manage their cases, engage with communities and ensure proper burials More

US Scientist Who Conceived of Groundbreaking Laser Technology Dies

Charles Townes, Nobel laureate, laser co-creator paved way for other scientific discoveries: CDs, eye surgery, metal cutters to name a few technologies that rely on lasers More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Super Bowl Ads Compete for Eyes on TV, Webi
X
January 29, 2015 9:58 AM
Super Bowl Sunday (Feb. 1) is about more than just the NFL's American football championship and big parties to watch the game. Viewers also tune in for the world famous commercials that send Facebook and Twitter abuzz. Daniela Schrier reports on the social media rewards for America’s priciest advertising.
Video

Video Super Bowl Ads Compete for Eyes on TV, Web

Super Bowl Sunday (Feb. 1) is about more than just the NFL's American football championship and big parties to watch the game. Viewers also tune in for the world famous commercials that send Facebook and Twitter abuzz. Daniela Schrier reports on the social media rewards for America’s priciest advertising.
Video

Video Theologians Cast Doubt on Morality of Drone Strikes

In 2006, stirred by photos of U.S. soldiers mistreating Iraqi prisoners, a group of American faith leaders and academics launched the National Religious Campaign Against Torture. It played an important role in getting Congress to investigate, and the president to ban, torture. VOA's Jerome Socolovsky reports.
Video

Video Freedom on Decline Worldwide, Report Says

The state of global freedom declined for the ninth consecutive year in 2014, according to global watchdog Freedom House's annual report released Wednesday. VOA's William Gallo has more.
Video

Video As Ground Shifts, Obama Reviews Middle East Strategy

The death of Saudi Arabia’s king, the collapse of a U.S.-friendly government in Yemen and a problematic relationship with Israel’s leadership are presenting a new set of complications for the Obama administration and its Middle East policy. Not only is the U.S. leader dealing with adversaries in Iran, the Islamic State and al-Qaida, but he is now juggling trouble with traditional allies, as White House correspondent Luis Ramirez reports.
Video

Video MRI Seems to Help Diagnose Prostate Cancer, Preliminary Study Shows

Just as with mammography used to detect breast cancer, there's a lot of controversy about tests used to diagnose prostate cancer. Fortunately, a new study shows doctors may now have a more reliable way to diagnose prostate cancer for high risk patients. More from VOA's Carol Pearson.
Video

Video Smartphones About to Make Leap, Carry Basic Senses

Long-distance communication contains mostly sounds and pictures - for now. But scientists in Britain say they are close to creating additions for our smartphones that will make it possible to send taste, smell and even a basic touch. VOA’s George Putic reports.
Video

Video NASA Monitors Earth’s Vital Signs From Space

The U.S. space agency, NASA, is wrapping up its busiest 12-month period in more than a decade, with three missions launched in 2014 and two this month, one in early January and the fifth scheduled for January 29. As VOA’s Rosanne Skirble reports, the instruments being lifted into orbit are focused on Earth’s vital life support systems and how they are responding to a warmer planet.
Video

Video Saved By a Mistake - an Auschwitz Survivor's Story

Dagmar Lieblova was 14 when she arrived at Auschwitz in December 1943, along with her entire Czech Jewish family. All of them were to die there, but she was able to leave after several months due to a bureaucratic mix-up which saved her life. Now 85, with three children and six grandchildren, she says she has a feeling of victory. This report by Ahmad Wadiei and Farin Assemi, of RFE/RL's Radio Farda is narrated by RFE’s Raymond Furlong.

Circumventing Censorship

An Internet Primer for Healthy Web Habits

As surveillance and censoring technologies advance, so, too, do new tools for your computer or mobile device that help protect your privacy and break through Internet censorship.
More

All About America

AppleAndroid

World Currencies

EUR
USD
0.8815
JPY
USD
117.85
GBP
USD
0.6581
CAD
USD
1.2420
INR
USD
61.404

Rates may not be current.