News

Nasdaq Market Paralyzed By Three-Hour Shutdown

Nasdaq Market Paralyzed By Three-Hour Shutdown

A television displays news about the Nasdaq on the Nasdaq building in New York, Thursday, Aug. 22, 2013. Nasdaq halted trading Thursday because of a technical problem, the latest glitch to affect the stock market. Photo: Associated Press/Seth Wenig

Trading in thousands of U.S. stocks ground to a halt for much of Thursday after an unexplained technological problem shut down trading in Nasdaq securities, the latest prominent disruption in U.S. markets.

Nasdaq resumed trading at around 3:25 p.m. EDT (1925 GMT), after a roughly 3-hour, 11-minute shutdown of trading in Apple, Google, Microsoft and more than 3,000 other U.S. companies. The shutdown 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 stopped abruptly at 12:14:03 p.m. (1614 GMT). Trading in a single stock resumed at 3 p.m., and other stocks soon followed.

Nasdaq’s own stock, which was up 0.8 percent before the halt, closed down 3.4 percent, after earlier trading down as much as 5.4 percent.

The exchange 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.”

“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.

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.

Nasdaq and its larger rival, NYSE Euronext’s New York Stock Exchange, said all trades executed between 12:14:03 and 12:23:31 p.m. would stand.

While some trading activity appeared normal following the resumption, difficulties persisted. Nasdaq said it stopped routing orders to NYSE’s all-electronic ARCA platform shortly after the resumption.

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 been briefed about the disruption, during which investors had 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 companies.

“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 against a stock exchange, to settle SEC civil charges over its mishandling of Facebook’s initial public offering.

James Angel, a Georgetown University finance professor who 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 in U.S. equity options markets.

Two weeks earlier, on August 6, stock exchange operator BATS Global Markets faced a nearly hour-long outage.

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

Other trading venues were also affected by Thursday’s outage. Several “dark pools,” which execute orders anonymously, were forced to stop trading, several market participants said.

“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.”

SEC SCRUTINY

Thursday’s outage could cause problems for Nasdaq at the SEC, which has cracked down on stock exchanges to beef up their compliance with regulations and police themselves better.

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.

Recent Headlines

in National, World

Israel warns of long Gaza war as Palestinian fighters cross border

Fresh
Israeli soldiers patrol outside the northern Gaza Strip on July 28, 2014.

Israeli Prime Minister Benjamin Netanyahu dashes any hopes of a swift end to the three-week conflict as Palestinian fighters launched an audacious cross-border raid.

in Music

Glen Matlock denies new Sex Pistols reunion

John Lydon, right, and Glen Matlock of The Sex Pistols perform at the Roxy in West Hollywood, Calif., on Thursday, Oct. 25, 2007.

Sex Pistols star Glen Matlock dashes fans' hopes of another reunion by insisting he hasn't had any contact with John Lydon in five years.

in Music

Aretha Franklin storms out of fast food joint

FILE - In this May 11, 2013 file photo, Aretha Franklin performs during McDonald's Gospelfest 2013 at the Prudential Center in Newark, N.J.Franklin won’t say what has caused her latest health problems, but says she’s had a “miraculous” recovery and is looking forward to performing soon.In a phone interview on Tuesday, Aug. 20, Franklin said that she recently had a cat scan and that it showed she was 85 percent improved. The 71-year-old has canceled several concerts and public appearances and blamed it on unspecified treatment.

Aretha Franklin stormed out a Johnny Rockets in Ontario, Canada last week after a nasty encounter with a rude employee.

in Sports

Only arguing remains in Sterling trail

FILE - In this Nov. 12, 2010, file photo, Shelly Sterling sits with her husband, Donald Sterling, right, during the Los Angeles Clippers' NBA basketball game against the Detroit Pistons in Los Angeles. With a $2 billion sale of the Clippers hanging in the balance, a judge is set to determine Monday, June 30, 2014, if the terms of a family trust alone are enough to confirm Donald Sterling was properly removed as trustee and allow his estranged wife to sell the team without his consent.

Only final arguments and a ruling remain in the trial to determine whether Donald Sterling's estranged wife can sell the Los Angeles Clippers for $2 billion.

in Music

The Beatles wanted to film ‘Lord of the Rings’

FILE- This is a 1967 handout image from Parlophone of The British group, The Beatles,. From left, are: Ringo Starr, John Lennon, Paul McCartney; and George Harrison. The woman who as a child was the basis for the Beatles song "Lucy in the Sky with Diamonds" is gravely ill. It was thought by many at the time that the psychedelic song from Sgt. Pepper's Lonely Heart Club Band was a paean to LSD because of the initials in the title, but it was actually based on a drawing that John Lennon's young son Julian brought home from school. He told his father the drawing was of Lucy in the sky with diamonds. Lucy Vodden, now living in Surrey just outside of London _ drifted apart after schoolyard days, but they have gotten back in touch as Lennon has tried to help Vodden cope with Lupus, a life-threatening disease.

Peter Jackson reveals John Lennon could have played Gollum in a Stanley Kubrick directed LOTR adaptation.