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Nasdaq trading halts for 3 hours due to glitch

August 23, 2013
By MATTHEW CRAFT , The Associated Press

NEW YORK - A mysterious technical glitch halted trading on the Nasdaq for three hours Thursday in the latest major electronic breakdown on Wall Street, embarrassing the stock exchange that hosts the biggest names in technology, including Apple, Microsoft and Google.

The problem sent brokers racing to figure out what went wrong and raised new questions about the pitfalls of the electronic trading systems that have come to dominate the nation's stock markets.

Nasdaq said only that the problem lay in its system for disseminating prices. An investigation was underway.

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AP PHOTO
The Nasdaq logo is displayed on its building in New York, Thursday. Nasdaq halted trading Thursday because of a technical problem, the latest glitch to affect the stock market.

The outage disrupted what had otherwise been a quiet summer day on Wall Street. It was another in a series of technical problems to disrupt financial markets, though less alarming than the "flash crash" that set off a stock-market plunge in May 2010.

"The market has gotten quite complex and needlessly so," said Sal Arnuk, co-founder of the brokerage Themis Trading.

The Nasdaq, a stock exchange dominated by some of the largest, most prosperous technology companies, sent out an alert shortly after noon that said it would stop trading. The Nasdaq composite index spent much of the afternoon stuck at 3,631.17.

Trading resumed at 3:25 p.m. Thirty-five minutes later, the day ended day with the index up 38 points, or 1 percent, at 3,638.71.

Investors are not at risk of losing any money from these glitches unless they are unlucky enough to be buying or selling a stock at the exact moment when an error occurs, forcing them to cancel their trades.

"Clearly it's an annoyance, but it doesn't in any way affect the value of your underlying assets," said Marty Leclerc at Barrack Yard, chief investment officer at Barrack Yard Advisors, an investment adviser. "Warren Buffet used to say that if you own a stock you ought to be comfortable with it even if the market were to close for a year."

During the outage, the Nasdaq said it wouldn't cancel any orders stuck in limbo, but that customers were free to cancel their orders before trading resumed.

The shutdown did not upset other parts of the stock market. But one stock that did take a hit was the parent company of the exchange, Nasdaq OMX, which fell $1.08, or 3.4 percent, to close at $30.46 in heavy trading.

The White House, the Treasury Department and other government agencies said they would monitor the disruption.

Brad McMillan, chief investment officer of the independent brokerage Commonwealth Financial, said competition between rival exchanges for customers was partly to blame. The exchanges try to bring in more business with the promise of faster trading, which makes them more reliant on new technology.

"The more trading is tied to technology, the more computer crashes matter," McMillan said.

He said he was not overly concerned about Thursday's disruption, recalling a day in August 1994 when a mischievous squirrel caused a brief closure of Nasdaq by chewing into power lines near the stock market's computer center in Trumbull, Conn.

The shutdown was another sign that the days of stock brokers in colorful jackets roaming the floor of the stock exchange have faded away. Now powerful computer programs dominate trading by sifting through reams of data and executing trades in fractions of a second. That makes trading faster and, arguably, more efficient. But it also introduces more possibilities for errors that can jolt the entire market.

Last year, BATS Global Markets tried to go public on its own exchange but had to back out after a computer error sent the stock price plunging to just pennies. Facebook's public offering last spring was also error-riddled, as technical problems kept many investors from knowing if their trades had gone through and left some holding unwanted shares. And in April, the Chicago Board Options Exchange shut down for a morning because of a software problem.

 
 

 

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