Technical glitch halts Nasdaq trading in latest electronic breakdown on Wall Street

  • Article by: MATTHEW CRAFT , Associated Press
  • Updated: August 22, 2013 - 6:45 PM
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Nasdaq halted trading due to a technical glitch.

Photo: Scott Eells, Bloomberg

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NEW YORK — A mysterious 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 and that it planned to investigate.

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 in recent years, though less alarming than the "flash crash" plunge of May 2010.

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

The Nasdaq, an exchange dominated by some of the largest, most prosperous technology companies, sent out an alert shortly after noon that said trading would stop. 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 with the index up 38 points, or 1 percent, at 3,638.71.

Investors were not at risk of losing any money from this type of glitch, said Marty Leclerc at Barrack Yard, chief investment officer at Barrack Yard Advisors.

"Clearly it's an annoyance, but it doesn't in any way affect the value of your underlying assets," Leclerc said. "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 would not cancel any orders stuck in limbo, but that customers were free to cancel them.

The stock of the exchange's parent company, Nasdaq OMX, took a hit Thursday, falling $1.08, or 3.4 percent, to close at $30.46 in heavy trading.

Phil Stern, a former Securities and Exchange Commission attorney for 10 years, said Nasdaq could face significant financial penalties and other sanctions.

"It's pretty significant for an exchange to be shut down this long," Stern said. "The disruption to the marketplace is huge."

The White House, the Treasury Department and other government agencies monitored the disruption.

Brad McMillan, chief investment officer of the independent brokerage Commonwealth Financial, said competition between rival exchanges for customers is partly to blame for recent trading problems. 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.

McMillan called the interruption an "inconvenience," comparing it to other times when snowstorms and squirrels have closed the market. In August 1994, trading on the Nasdaq stopped for 34 minutes after a mischievous squirrel chewed into power lines near the exchange's computer center in Trumbull, Conn.

Thursday's 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.

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