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

  • Article by: MATTHEW CRAFT , Associated Press
  • Last update: August 22, 2013 - 6:45 PM

Last year, BATS Global Markets tried to go public on its own exchange but had to back out after a computer error sent its stock price plunging to just pennies. Nasdaq mishandled Facebook's public offering last spring, when 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.

Then there was the 2010 "flash crash" in which the Dow Jones industrial average fell hundreds of points in minutes before eventually closing 348 points lower. It was one of the first major problems that revealed to the public the potential dangers of computerized trading.

One of the lessons from the flash crash was that it's better to stop trading and reopen a market in a fair and orderly manner than to have messy trading, said James Angel, a finance professor at Georgetown University who specializes in the structure and regulation of financial markets.

"I think people are so used to the fact that every once in a while the power goes out and a computer crashes," Angel said. "As long as the trading is fair and orderly, I don't think that's going to deter people from investing."

Trading glitches can also change fortunes. A technical bug spelled the end for Knight Capital as a stand-alone company. It marred the company's long-standing reputation as a stellar risk manager after sending stocks of dozens of companies swinging wildly on Aug. 1 of last year.

It also left Knight, which takes orders from big brokers like TD Ameritrade and E-Trade, on the hook for many of the stocks that its computers accidentally ordered. Knight teetered near bankruptcy and this summer was taken over by the high-speed trading firm Getco.

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