Computer errors force Nasdaq shutdown

US stock exchange closes for three hours after malfunction in operating system

PUBLISHED : Friday, 23 August, 2013, 9:49am
UPDATED : Saturday, 24 August, 2013, 4:33am

Computer malfunctions shook American equity trading for the second time this week, freezing thousands of securities listed on the Nasdaq stock market for three hours and raising fresh concerns about the fragility of exchanges.

The second-biggest American market operator, home to 3,200 companies from 37 countries, halted transactions in all of its shares shortly after noon on Thursday, a decision that caused buying and selling to stop on its platform and dozens of others where the securities trade. Errors in the feed used to disseminate quotes and prices were to blame, Nasdaq said on its website.

Many of the country's most-traded shares, from Apple to Intel and Facebook, ground to a virtual standstill as brokers were unable to execute customer orders. Nasdaq equity indices did not update during the outage and volume in stocks listed on the New York Stock Exchange also dwindled as liquidity dried up around the country.

"The real fear is that we get stuck wearing some kind of risk because of an interruption that is not of our doing," said Max Breier, a senior equity derivatives trader at BMO Capital Markets in New York. "Any halt in information or ability to trade is going to hinder our ability to manage our risk and take positions."

Shares covered by the halt began to change hands again at about 3.25pm in New York. Nasdaq let stand transactions executed between 12.14pm and 12.23pm. Open orders were not automatically cancelled and customers were told they could cancel them voluntarily before trading resumed, the exchange company said on its website.

The malfunction in the data feed system known as the securities industry processor was fixed in the first 30 minutes and a regulatory halt for all Nasdaq-listed securities was issued to "protect the integrity of the markets," Nasdaq said in a statement after the close of trading.

Arca, the electronic exchange owned by NYSE Euronext, was the exchange member that reported a connectivity issue with Nasdaq's data processor, according to a person with direct knowledge of the matter who asked not to be named because the matter is private. Rich Adamonis, a spokesman for NYSE Euronext, declined to comment.

"Nasdaq OMX will work with other exchanges that are members of the SIP to investigate the issues … and we will support any necessary steps to enhance the platform," the company said in a statement.