Trading in all $5.65 trillion of Nasdaq-listed securities was halted for more than three hours on Thursday due to a technical glitch, representing the latest stark example of how complex equity markets have become.
Nasdaq resumed trading at around 3:25 p.m. EDT (19:25 GMT), after a 3-hour, 11-minute shutdown of trading in such familiar names as Apple Inc, Facebook Inc, Google Inc, Microsoft Corp and about 3,200 other companies.
Transactions first restarted at 3 p.m. Eastern time in a single microcap stock, Atlantic American, a test case picked for its front-of-the-alphabet ticker. Twenty-five minutes later, the rest of the market opened, and, according to a Nasdaq statement, “The trading day finished in normal course.”
Shares of Nasdaq itself, which initially fell by more than 5 percent when trading resumed, recovered some of their lost ground to close the day 3.4 percent lower. The widely tracked Nasdaq composite index gained nearly 1.1 percent.
The shutdown was the longest in recent memory, and prompted U.S. Securities and Exchange Commission Chair Mary Jo White to call for a meeting of Wall Street leaders to help insure the “continuous and orderly” functioning of securities markets.
“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.
Most of the 191 minutes that the exchange was dark was spent in sometimes frantic conversation with scores of banks, brokers, investment companies and rival exchanges who wanted Nasdaq’s assurance that a restoration of trading would be orderly and would not lead to panic.
The U.S. Securities and Exchange Commission said it was monitoring developments and was in touch with the exchanges on the matter.
Late on Thursday, Nasdaq’s parent Nasdaq OMX Group Inc said it halted trading after learning that the Securities Information Processor, or SIP, which consolidates stock prices, was not disseminating price quotations.
It said a “connectivity issue” between an unnamed exchange participant and the SIP caused the breakdown, and that the cause has been “identified and addressed.”
Nasdaq said in a statement it plans to work with other exchanges to investigate Thursday’s outage, which centered on a problem with the data feed supplying U.S. markets with trade information, and supports “any necessary steps to enhance the platform.”
Nasdaq officials internally pointed to a “connectivity” problem with rival NYSE Arca, according to people familiar with the matter. Nasdaq officials say their technicians should have been able to manage the problems and avoid the halt. A person close to NYSE Euronext said the exchange was confident that regulators will review the outage thoroughly, reports the Wall Street Journal.
SEC Chairwoman Mary Jo White said the episode “should reinforce our collective commitment to addressing technological vulnerabilities of exchanges and other market participants.”
“I think this was handled terribly on the part of Nasdaq. It seemed as if they didn’t really know how to respond to these events,” Harvey Pitt, former chairman of the SEC, told FOX Business. Nasdaq’s handling of the situation “left the markets in a state of complete disarray.”
Thursday’s failure at Nasdaq is the latest of a flurry of high-profile glitches to hit U.S. stock market trading. The incidents, including the “flash crash” in 2010, errors related to the Facebook Inc IPO and Knight Capital’s disastrous trading blowup last year, have undermined market confidence, says the Huff Post via Reuters.