Nasdaq Trading Halted For Hours By Technical Glitch
MELISSA BLOCK, HOST:
From NPR News, this is ALL THINGS CONSIDERED. I'm Melissa Block.
AUDIE CORNISH, HOST:
And I'm Audie Cornish.
A big blow today to Wall Street and its technology. Investors were rattled when trading in NASDAQ stocks was halted for more than three hours. NASDAQ blamed the problem on a glitch in the system that handles stock quotes.
NPR's Dan Bobkoff joins me now to explain what happened in one of the biggest market mishaps in years. Hi there, Dan.
DAN BOBKOFF, BYLINE: Hi.
CORNISH: And, Dan, I gather it all started around 12:14 Eastern time this afternoon. What have you learned?
BOBKOFF: That's right. The NASDAQ halted trading of stocks and the market remained down for much of the afternoon. On its website, NASDAQ says it had issues with its stock quote system. Now, NASDAQ is completely electronic. The AQ in the name actually stands for Automatic Quotation. There are no people shouting out orders to each other, so it relies completely on computer systems to function. Other markets, like the New York Stock Exchange, continued to trade but the outage at NASDAQ was felt across Wall Street.
NASDAQ is the home to many really big stocks like Apple, Cisco, Intel. They're closely watched and they move market averages. So with the NASDAQ down, it was like a big hole was cut out of the market for a few hours. And there wasn't much information, either. No one from NASDAQ went on television during the afternoon. We finally got a statement late in the afternoon blaming the outage on that price quote system, saying the exchange solved its technical problems in the first 30 minutes but it took the remaining time to work with other exchanges and regulators to get everything back up and running, it says.
CORNISH: So when did trading finally resume? And when it did, how did it go?
BOBKOFF: Well, the system sputtered alive around 3:25 in the afternoon. Trading resumed for all NASDAQ stocks. Traders could have cancelled trades that didn't go through, but that was their choice. There was some questions about how much of the system was functioning and whether traders could trust the prices. In the end, despite the shutdown, the NASDAQ actually closed up about one percent. We should say that the parent company of NASDAQ, NASDAQ OMX, saw its own stock price fall - down about three and a half percent.
The good news is that this was a quiet day in August. No big news in the markets, volume was low; lots of traders are on vacation, so if a major market is going to fail, this is one of the better days for it. But it was strange to see the NASDAQ completely stopped for hours. Usually trading times are measured in milliseconds.
NASDAQ now has a lot of questions to answer after this. And the Securities and Exchange Commission says it's monitoring the situation. And the president was briefed on the disruption.
CORNISH: Now, has anything like this happened before?
BOBKOFF: Oh, yes. Even before today, there have been a number of issues and glitches that have rattled market confidence. Just this week, Goldman Sachs sent a whole bunch of erroneous trades into the market. And then last year, NASDAQ had big problems on the day Facebook went public; trades were delayed, traders had incomplete information. NASDAQ blamed that incident on software issues, which sounds familiar today.
Then there was the infamous flash crash in 2010. That's when the market plunged and then recovered in a matter of minutes. And in 1987, a squirrel caused a power outage in Connecticut...
BOBKOFF: ...that knocked out the NASDAQ for more than an hour.
CORNISH: Seriously, are there concerns that this could be, you know, a blow to investor confidence?
BOBKOFF: Absolutely, many are asking where are the backup systems? How could a major U.S. stock market have a computer failure for hours? And, of course, we can just add this to the list of things to worry individual investors. There are technical glitches, yes, insider trading, and there's also high-speed trading, where firms with powerful computers can make trades for ordinary investors can. Not to mention the financial crisis itself, so no wonder some investors might want to sit on the sidelines even as the markets have done well the past few years.
CORNISH: That's NPR is Dan Bobkoff. Dan, thank you.
BOBKOFF: Thank you.