Nasdaq market paralyzed by three hour shutdown

NEW YORK,  (Reuters) – Trading in thousands of U.S. stocks ground to a halt for much of yesterday after an unexplained technological problem shut down trading in Nasdaq securities, the latest prominent disruption to the operations of U.S. markets.

Nasdaq resumed trading at around 3:25 p.m. EDT (1925 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.

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.

“Any brokerage firm gets paid by executing orders,” said Sal Arnuk, co-head of equity trading at Themis Trading in Chatham, New Jersey. “So yes, we are frustrated, and this hurts us, it hurts the market and it hurts public confidence.”

Late yesterday, 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 also said technical issues were resolved within 30 minutes and that it worked with other exchanges, regulators and market participants to ensure an orderly resumption of trading.
“NASDAQ OMX will work with other exchanges that are members of the SIP to investigate the issues of today, and we will support any necessary steps to enhance the platform,” it said.
The problems surfaced at 12:14:03 p.m. (1614 GMT), when all traffic through Nasdaq stopped abruptly.

During the shutdown, trading of shares not listed on Nasdaq continued, but transactions could not be executed on the Nasdaq platform. Options trading was also halted.

“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.

Trading in one stock resumed at 3 p.m., and even after broader trading resumed, some difficulties persisted, and Nasdaq said it stopped routing orders to the New York Stock Exchange’s all-electronic ARCA platform shortly after the resumption.

Nasdaq’s own stock, which was up 0.8 percent before the halt, closed down 3.4 percent, after earlier trading down as much as 5.4 percent. Meanwhile, the Nasdaq index itself closed up 1.1 percent, higher than where it was before the halt.

“The fact we didn’t see a larger dip on today’s mess shows most investors are, for better or worse, becoming more comfortable with these mistakes,” said Ryan Detrick, senior technical strategist at Schaeffer’s Investment Research.

During the shutdown, Nasdaq sent a series of alerts advising clients and traders about the scope of the outage, and later, its plans to resume trading.
Wall Street banks spent the period translating the messages to clients, who were at first panicked, and later frustrated, over how and whether their trades would be processed.

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