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Thu August 22, 2013
Trading Resumes On Nasdaq After 3-Hour Outage
Originally published on Thu August 22, 2013 4:10 pm
Update 3:28 p.m.: Trading has resumed on Nasdaq following three-hour outage caused by a technical glitch.
Nasdaq halted trading Thursday because of a technical problem, the latest glitch to affect the stock market.
The exchange sent out an alert to traders at 12:14 p.m. Eastern saying that trading was being halted until further notice because of problems with a quote dissemination system. More than an hour later, trading was still halted.
The glitch was the latest incident to raise questions about the dangers of trading via machine, following a sudden plunge in stocks in May 2010 that came to be known as the “flash crash” and the glitch-plagued initial public offering of Facebook last year.
Nasdaq said it wouldn’t be canceling any open orders, but that customers could cancel orders if they wanted to.
Nasdaq sent out an update at 1 p.m. EDT saying trading would reopen “at a time to be determined.”
The Nasdaq composite index was frozen at 3,631.17, up 31.38 for the day. The index is up 20 percent so far this year.
Securities and Exchange Commission spokesman John Nester said: “We are monitoring the situation and are in close contact with the exchanges.”
- Hear the earlier interview with Marilyn Geewax, NPR senior business editor, at 1:35 p.m. Eastern.
ROBIN YOUNG, HOST:
From NPR and WBUR Boston, I'm Robin Young. It's HERE AND NOW.
And it has been a wilder day than usual on Wall Street. At a little after noon East Coast Time, trading on the Nasdaq came to a grinding halt because of a technical issue. It is now 3:34 and 45 seconds East Coast time, and trading is pretty much back up. Bloomberg News stocks editor at-large Michael Regan joins us from New York. Michael, what happened?
MICHAEL REGAN: Well, Robin, what happened is there's a system called the securities information processor, and what that does is it's a feed from Nasdaq that basically takes all the trades that happened, whether it'd be on Nasdaq or other exchanges. And it takes the Nasdaq-listed stocks and it sends out basically what they call the tape, which is the quotes for all the trades that have happened. And it's called the securities information processor, or they call it the SIP in slang.
And basically what happened is Nasdaq had some sort of issue with that system where they were unable to disseminate quotes of Nasdaq-listed stocks throughout the market. So they basically had to shut the exchange down right around a little bit after noon. It stayed shut down until about 3:25, so a little bit more than three hours.
Now, the thing to realize is, you know, stocks are either listed on the New York Stock Exchange or the Nasdaq. However, those stocks could trade on any number of more than 50 venues around the country. So Nasdaq, however, because it lists those stocks, it's responsible for disseminating the quote information to the entire marketplace. So since it wasn't able to do that, that's why they had to stop; they halted trading in these stocks, not just on the Nasdaq exchange but basically halted trading of them everywhere throughout the country. And it's, you know, some of your biggest names in the country, Apple and Intel and Yahoo.
YOUNG: Sure. And this meant that about 20 commentators on CNBC went nuts for three hours...
YOUNG: ...watching this go on. I mean it was just a question as to whether or not it was a really terrible thing or not. There were some people saying, you know, what, we're trading so much at high speed on computer that have glitches, that people have gotten used to this; others saying, used to this? You know, people were in the middle of trades, trades were left open and stopped. And Nasdaq, by the way, said that if you're in the middle of a trade they would forgive it or not count it or something. But what - was it very, very bad, or is it something that people are getting used to?
REGAN: People are getting used to sort of these problems with electronic trading. I would say this is probably the biggest issue the stock market has faced since the flash crash of 2010. I mean, for, you know, one of the biggest exchanges to stop trading in all of Nasdaq-listed stocks for three hours, that is a huge deal.
Now, it's not having a huge impact as far as the prices of stocks. You know, the market's up pretty well right now. The Nasdaq Composite Index itself is up about 1 percent after some, you know, good economic data from overseas. However, it is for the trading community and for broker dealers, for anybody involved in the market, from a professional standpoint, it's a huge deal. And there is bound to be, you know, an autopsy of this going on for weeks and months, and a lot of, you know, ramifications.
YOUNG: You remind us of the flash crash of 2010. There was the technical problem in 2012 when there was the debut trading of Facebook shares. And it just seems to underscore that the system is vulnerable. This was a technical glitch. What if it were hacking?
REGAN: Right. Well, yeah, you know, no one has come out and said, you know, if hacking is a possibility or not. I would - my guess would be that it's unlikely to be hacking because - right.
YOUNG: Oh, yeah. I'm just saying a point out that if somebody were to, it's a system that goes down and goes down quickly.
REGAN: It does, yes. And it really - like you said, it's the latest in a long string problems. Just earlier this week there was a big problem in the options market where a computer at Goldman Sachs sent out many, many unintended trades that caused prices to swing all over the place. So it's the latest in many problems.
YOUNG: Michael Regan, stocks editor at-large at Bloomberg News on the Nasdaq crash today. Trading stopped for about three hours. But it's back up now. Michael, thank you.
REGAN: Thank you.
YOUNG: Take a break. Be back, HERE AND NOW. Transcript provided by NPR, Copyright NPR.