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

Photogallery Pistorius Sentenced, Taken to Prison

Pistorius, convicted of culpable homicide in shooting death of girlfriend Reeva Steenkamp, will likely serve about 10 months of five-year sentence, before completing it under house arrest More

UN to Aid Central Africa in Polio Vaccinations

Synchronized vaccinations will be conducted after Cameroon reports a fifth case of the wild polio virus in its territory More

WHO: Ebola Vaccine Could Be in Use by January

WHO assistant director Dr. Marie Paule Kieny says clinical trials of Ebola vaccines are underway or planned in Europe, US and Africa More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
After Decades of Pressure, Luxembourg Drops Bank Secrecy Rulesi
X
October 21, 2014 12:20 AM
European Union finance ministers have reached a breakthrough agreement that will make it more difficult for tax cheats to hide their money. The new legislation, which had been blocked for years by countries with a reputation as tax havens, was approved last week after Luxembourg and Austria agreed to lift their vetoes. But as Mil Arcega reports, it doesn’t mean tax cheats have run out of places to keep their money hidden.
Video

Video After Decades of Pressure, Luxembourg Drops Bank Secrecy Rules

European Union finance ministers have reached a breakthrough agreement that will make it more difficult for tax cheats to hide their money. The new legislation, which had been blocked for years by countries with a reputation as tax havens, was approved last week after Luxembourg and Austria agreed to lift their vetoes. But as Mil Arcega reports, it doesn’t mean tax cheats have run out of places to keep their money hidden.
Video

Video Kobani Refugees Welcome, Turkey Criticizes, US Airdrop

Residents of Kobani in northern Syria have welcomed the airdrop of weapons, ammunition and medicine to Kurdish militia who are resisting the seizure of their city by Islamic State militants. The Turkish government, however, has criticized the operation. VOA’s Scott Bobb reports from southeastern Turkey, across the border from Kobani.
Video

Video China Political Meeting Seeks to Improve Rule of Law

China’s communist leaders will host a top level political meeting this week, called the Fourth Plenum, and for the first time in the party’s history, rule of law will be a key item on the agenda. Analysts and Chinese media reports say the meetings could see the approval of long-awaited measures aimed at giving courts more independence and include steps to enhance an already aggressive and high-reaching anti-corruption drive. VOA’s Bill Ide has more from Beijing.
Video

Video US ‘Death Cafes’ Put Focus on the Finale

In contemporary America, death usually is a topic to be avoided. But the growing “death café” movement encourages people to discuss their fears and desires about their final moments. VOA’s Jerome Socolovsky reports.
Video

Video Ebola Orphanage Opens in Sierra Leone

Sierra Leone's first Ebola orphanage has opened in the Kailahun district. Hundreds of children orphaned since the beginning of the Ebola outbreak face stigma and rejection with nobody to care for them. Adam Bailes reports for VOA about a new interim care center that's aimed at helping the growing number of children affected by Ebola.
Video

Video Young Nairobi Tech Innovator on 'Track' in Security Business

A 24-year-old technology innovator in Nairobi has invented a tracking device that monitors and secures cars. He has also come up with what he claims is the most robust audio-visual surveillance system yet. As Lenny Ruvaga reports from the Kenyan capital, his innovations are offering alternative security solutions.
Video

Video Latinas Converting to Islam for Identity, Structure

Latinos are one of the fastest growing groups in the Muslim religion. According to the Pew Research Center, about 6 percent of American Muslims are Latino. And a little more than half of new converts are female. VOA’s Carolyn Presutti travelled to Miami, Florida -- where two out of every three residents is Hispanic -- to learn more.
Video

Video Exclusive: American Joins Kurds' Anti-IS Fight

The United States and other Western nations have expressed alarm about their citizens joining Islamic State forces in Syria and Iraq. In a rare counterpoint to the phenomenon, an American has taken up arms with the militants' Syrian Kurdish opponents. Elizabeth Arrott has more in this exclusive profile by VOA Kurdish reporter Zana Omer in Ras al Ayn, Syria.
Video

Video South Korea Confronts Violence Within Military Ranks

Every able-bodied South Korean male between 18 and 35 must serve for 21 to 36 months in the country’s armed forces, depending upon the specific branch. For many, service is a rite of passage to manhood. But there are growing concerns that bullying and violence come along with the tradition. Reporter Jason Strother has more from Seoul.
Video

Video North Carolina Emerges as Key Election Battleground

U.S. congressional midterm elections will be held on November 4th and most political analysts give Republicans an excellent chance to win a majority in the U.S. Senate, which Democrats now control. So what are the issues driving voters in this congressional election year? VOA National Correspondent Jim Malone traveled to North Carolina, one of the most politically competitive states in the country, to find out.
Video

Video Comanche People Maintain Pride in Their Heritage

The Comanche (Indian nation) once were called the “Lords of the Plains,” with an empire that included half the land area of current day Texas, large parts of Oklahoma, New Mexico, Kansas and Colorado.The fierceness and battle prowess of these warriors on horseback delayed the settlement of most of West Texas for four decades. VOA’s Greg Flakus reports from Lawton, Oklahoma, that while their warrior days are over, the 15,000 members of the Comanche Nation remain a proud people.
Video

Video Turkey Campus Attacks Raise Islamic Radicalization Fears

Concerns are growing in Turkey of Islamic radicalization at some universities, after clashes between supporters of the jihadist group Islamic State (IS) or ISIS, and those opposed to the extremists. Pro-jihadist literature is on sale openly on the streets of Istanbul. Critics accuse the government of turning a blind eye to radicalism at home, while Kurds accuse the president of supporting IS - a charge strongly denied. Henry Ridgwell reports from London.

All About America

AppleAndroid

World Currencies

EUR
USD
0.7798
JPY
USD
106.41
GBP
USD
0.6203
CAD
USD
1.1242
INR
USD
61.430

Rates may not be current.