Nasdaq Halts Trading in Stocks, Options Amid Computer Error

Aug. 22 (Bloomberg) — Computer breakdowns shook American equity markets again today as malfunctioning software that feeds data between exchanges prompted Nasdaq Stock Market to halt trading in thousands of stocks and options.
 
Nasdaq said trading for all its listed stocks will resume by about 3:25 p.m. following a 15-minute quote-only period, according to a statement on its website.
 
Nasdaq said earlier that trading in shares it lists had been stopped amid issues at its Securities Information Processor, the feed that disseminates quotes and prices. The second-biggest stock market operator in the U.S. halted transactions in what it calls Tape C, which comprises all Nasdaq-listed securities.
 
Buying and selling in many of the country’s most heavily traded shares from Apple Inc. to Intel Corp. and Facebook Inc. ground to a virtual halt as brokers were unable to execute customer orders. The Nasdaq 100 equity index stopped moving shortly after noon, according to data compiled by Bloomberg. The Dow Jones Industrial Average, which has Microsoft Corp. and Cisco Systems Inc., continued to update.
 
The disruption, just two days after options markets were roiled by mistaken trades sent by Goldman Sachs Group Inc., is the latest in a series of computer malfunctions that have raised questions about the reliability of electronic markets. Nasdaq faced criticism last year when its computers mishandled the public debut of Facebook, causing hundreds of millions of dollars in losses for its member firms.
 

“This is just another one of those headaches that are going on with this electronic stuff,” Frank Ingarra, head trader at Greenwich, Connecticut-based NorthCoast Asset Management LLC, said in a phone interview. “That’s why it is important that you have multiple venues.”
 
The action froze stocks both on Nasdaq’s platforms and dozens of other markets around the country that trade securities it lists. Companies from Bats Global Markets Inc. in Lenexa, Kansas, to Jersey City, New Jersey-based Direct Edge Holdings published notices saying they were adopting Nasdaq’s halt.
 
Even though the action was specific to stocks Nasdaq hosts, it depressed volume marketwide.
 
Securities on Nasdaq have a combined market capitalization of more than $5 trillion, based on the value of the 2,446-member Nasdaq Composite Index. For securities that list on the New York Stock Exchange, it was “business as usual,” according to Sara Rich, a spokeswoman.
 

The breakdown is one of a growing number of trading failures that have coincided with the expanding complexity of global financial markets. U.S. equity trading, which began with on Wall Street more than two centuries ago and was dominated by the New York Stock Exchange, has become dispersed among more than 50 computerized platforms accessible around the world.
 
“It has essentially halted” trading, Ian Winer, director of equity trading at Wedbush Securities Inc., said in an interview. “We cannot execute customer orders in any Nasdaq security so we are basically in a wait-and-see mode from Nasdaq.”
 
Signs of strain appeared earlier when NYSE’s Arca canceled orders for Nasdaq shares and other exchanges routed orders away from the electronic platform through a procedure known as self- help. Just before 12:30 p.m., shares of Yahoo! Inc. briefly plunged more than a dollar over about a dozen trades. Intel surged 20 cents or more in a handful of transactions.
 

“We are monitoring the situation and are in close contact with the exchanges,” SEC spokesman John Nester said.