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Nasdaq's Investigation Continues After 'Flash Freeze'

In a statement following the three hour trading halt, Nasdaq says it will continue to investigate the source of the glitch.

Thursday evening, following the "flash freeze" of NASDAQ OMX, the electronic exchange issued a statement on the technical glitch that shut down the U.S. exchange's trading for three hours.

"Earlier this afternoon, NASDAQ OMX became aware that price quotes were not being disseminated by the Securities Industry Processor (SIP), which consolidates and disseminates all prices for the industry," reads the statement. "There was a connectivity issue between an exchange participant and the SIP, which led to degradation in the ability of the SIP to disseminate consolidated quotes and trades. The cause of the issue has been identified and addressed."

"Responding to the SIP issue, in order to protect the integrity of the markets, NASDAQ OMX issued a regulatory halt for all trading in NASDAQ-listed securities. In the first 30 minutes, technical issues with the SIP were resolved."

According to The Wall Street Journal, "Nasdaq officials internally pointed to a "connectivity" problem with rival NYSE Arca," but that Nasdaq's team should have been able to remedy the issue and avoid a halt in trading.

[Learn more about the glitch Nasdaq Resumes Trading After 'Flash Freeze' ]

The "flash freeze," an appropriately sensational title, lasted from just after noon EST though 3:25PM. The New York Stock Exchange halted the the trade of Nasdaq-based stocks as well as several dark pool platforms.

Some Dark pools reportedly continued to trade at the beginning of the crash, after other exchanges had received word to stop, because their electronic systems did not receive any automated halt orders from Nasdaq (as they do at the start and stop of each trading day), and had to be manually stopped by traders. Electronic halt orders came in at 2:08, two hours after the shutdown, according to New York broker Investment Technology Group in an interview with Wall Street Journal.

It remains to be seen what the trading losses from this snafu will total, but it bears remembering that Nasdaq's infamous Facebook IPO glitch last May resulted in more than $500 million in trading losses across major trading firms.

Digging for Answers

The Wall Street Journal reports Nasdaq's lack of readily available answers to the trading firms and frustrated public "sowed confusion across Wall Street." It certainly has done no favors for Nasdaq's reputation; it aims to be seen as the leader in delivering high-tech to the markets.

Nasdaq intends to thoroughly investigate the cause of the glitch, which is believed to revolve around the data feed supplying markets with trade information.

The U.S. Securities and Exchange Commission said it will also be closely monitoring the on-going Nasdaq trading freeze. The incident, which comes on the heels of the Goldman Sachs trading glitch on Tuesday, has also raised several questions about confidence in the systems running the market.

Wall Street Journal reminds us that the "SEC proposed new rules in March designed to guard against calamities brought on by haywire program trading." While exchanges have been denying the need for these regulations, recent events may erode their argument.

[Why is Goldman Sachs, suffering from trading glitches?]

Yesterday evening's statement from Nasdaq concluded: "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." Becca Lipman is Senior Editor for Wall Street & Technology. She writes in-depth news articles with a focus on big data and compliance in the capital markets. She regularly meets with information technology leaders and innovators and writes about cloud computing, datacenters, ... View Full Bio

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salvatoresferrazza
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salvatoresferrazza,
User Rank: Apprentice
9/4/2013 | 3:24:01 PM
re: Nasdaq's Investigation Continues After 'Flash Freeze'
I've been thinking about this quite a bit lately and frankly think the word should be banished from the technologist's lexicon entirely. It holds us back, becoming a very convenient device to use as shorthand for "complexity debt collection." Indeed, as Kathy mentions above, it does provide a good accountability smokescreen.
IvySchmerken
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IvySchmerken,
User Rank: Author
8/27/2013 | 3:50:09 PM
re: Nasdaq's Investigation Continues After 'Flash Freeze'
Retail order flow is often going direct to brokerage firms that are called "internalizers" that match buyers and sellers. The online brokers are paid for their order flow. So if you trade as a retail investor, your orders are not necessarily going to the exchange. Exchanges have been complaining about this to regulators. Internalizers will give you the best price in the market - based on the consolidated feed from the SIP. That opens up another can of worms, since last Thursday, the SIP feed was not working properly for Nasdaq -listed securities, causing Nasdaq to halt the market.
Joe Brunner
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Joe Brunner,
User Rank: Apprentice
8/24/2013 | 8:35:12 AM
re: Nasdaq's Investigation Continues After 'Flash Freeze'
Imagine you never walked into your favorite Casino again. Imagine nobody else ever did. The pretty machines, carpets, tables and girls serving drinks would all turn to dust... that's what happening in the financial markets... the longer the retail "investor" stays away and doesn't loose money to them in their Schwab or E-Trade account - the more these "crashes" will happen. The Casino (Nasdaq) needs our money guys... we should start trading again...
joeaffmdsys
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joeaffmdsys,
User Rank: Apprentice
8/24/2013 | 8:35:12 AM
re: Nasdaq's Investigation Continues After 'Flash Freeze'
Imagine you never walked into your favorite Casino again. Imagine nobody else ever did. The pretty machines, carpets, tables and girls serving drinks would all turn to dust... that's what happening in the financial markets... the longer the retail "investor" stays away and doesn't loose money to them in their Schwab or E-Trade account - the more these "crashes" will happen. The Casino (Nasdaq) needs our money guys... we should start trading again...
IvySchmerken
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IvySchmerken,
User Rank: Author
8/23/2013 | 9:31:59 PM
re: Nasdaq's Investigation Continues After 'Flash Freeze'
Glitch is one of the easy ways to describe a technical problem, but I agree, it's vague and doesn't delve into underlying details. It could be network, hardware, software, or something else. Reading the Nasdaq Trader Alert can still be confusing: From NasdaqTrader Alerts: "The UTP SIP experienced connectivity issues with a UTP Participant that led to degradation of a piece of SIP software and in the ability of the UTP SIP to disseminate consolidated quotes." Does this mean the SIP crashed? It's hard to know what really happened.
KBurger
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KBurger,
User Rank: Author
8/23/2013 | 7:58:32 PM
re: Nasdaq's Investigation Continues After 'Flash Freeze'
Ha, see my comments above. Case closed.
KBurger
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KBurger,
User Rank: Author
8/23/2013 | 7:57:45 PM
re: Nasdaq's Investigation Continues After 'Flash Freeze'
Question: when did "glitch" become a technical term? I'm sure it's just easier for the media (except WS&T of course) to say this happened because of a glitch than to try to understand and explain what really happens during trading, what the systems that support trading do, and the ways in which these systems can fail or have problems. OK, not everyone works in IT -- but it's this desire not to understand details and to slap a clever/easy label on complicated things that has contributed to many of our problems in politics, business, education, etc.At the same time -- "let's blame IT!" -- easier than examining potential systemic or management problems.
Greg MacSweeney
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Greg MacSweeney,
User Rank: Apprentice
8/23/2013 | 5:55:49 PM
re: Nasdaq's Investigation Continues After 'Flash Freeze'
Funny story. Back in 2008 or 2009, the morning show at CNBC called us up and asked one of our editors to come on the show and talk about Dark Pools. When the interview started, the first words from the host were something like: "Dark pools. Sounds dirty and creepy, if you ask me."

We thought, wow. At that time, we had been writing about dark pool for a year or two and the CNBC hosts were just hearing about Dark Pools? Talking "empty" heads, apparently.
Byurcan
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Byurcan,
User Rank: Author
8/23/2013 | 3:47:52 PM
re: Nasdaq's Investigation Continues After 'Flash Freeze'
Also, "dark pools" scare me, I don't know what they are, but they sound ominous...
Becca L
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Becca L,
User Rank: Author
8/23/2013 | 3:15:04 PM
re: Nasdaq's Investigation Continues After 'Flash Freeze'
Sadly, that's probably one of the healthiest ways to approach the market.
Page 1 / 2   >   >>
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