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Another Technical Glitch for Nasdaq

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Close on the heels of last month’s three-hour outage, Reuters reported that Nasdaq OMX Group’s (NDAQ - Free Report) namesake exchange suffered yet another technical glitch on Sep 4, 2013. Incidentally, yesterday’s six-minute outage originated from the same system, the Securities Information Processor (SIP), which was responsible for the Aug 22 outage.

The Securities Information Processor (SIP) receives all traffic quotes and orders for Nasdaq stocks. The main data feed was down from 11.35 a.m. to 11.41 a.m. ET and Nasdaq stated that the outage in one of its quote dissemination channels was specific to “symbols through PC through SPZ”.

Nasdaq stated that a hardware memory failure in a back-end server was responsible for the glitch. The U.S. Securities and Exchange Commission declared that it was in contact with the exchange and was monitoring the developments.

However, Nasdaq stated that trading was not affected and the issue was resolved. Nevertheless, exchange operator Direct Edge reported a five-minute halt in the securities in symbols from PBCP through ZZZZ from 11.43 a.m. to 11.48 a.m. ET

On Aug 22, the problem with SIP failing to disseminate price quotes had led to the massive three-hour technical crash. Eventually, the shares of Nasdaq OMX tanked 3.42% to close at $30.46.

On Aug 22, SIP failed to disseminate price quotes owing to its connectivity issue with NYSE Euronext Inc.’s Arca Exchange.  As a result, the three-hour trading halt affected 2,700 stocks including bellwethers like Google Inc. , and Facebook Inc. (FB - Free Report) . Reportedly, it was the longest duration for which trading got halted on the Nasdaq.

Following the outage yesterday, Nasdaq pointed out that it required more stress testing on its system. For this, it chalked out a number of strategies that would manually block connections to other exchanges and market participants when there is massive traffic clogging the data feed.

While the U.S. market is already blamed for its fragmentation, such technical interruptions raise concerns about the smooth functioning of electronic trading. Technical disruptions raise questions about the reputation of the exchanges.

Nasdaq has been witnessing such technical glitches time and again. In May 2012, another technical glitch delayed Facebook’s initial public offering by 30 minutes.

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