While the technical crash halted trading at the Nasdaq for around three hours and affected the U.S. benchmarks, shares of The Nasdaq OMX Group, Inc. (NDAQ) were not spared either as they tanked $1.08 or 3.42% to close at $30.46 yesterday.
Nasdaq stated that there were some problems as Securities Information Processor (SIP) failed to disseminate price quotes owing to its connectivity issue with an exchange participant. Though it was resolved within 30 minutes of identifying the problem, trading could only restart after about three hours as Nasdaq, other exchanges, regulators and market participants worked together to ensure smooth functioning. Operations went on uninteruupted after the trading resumed.
The trading halt affected approximately 2,700 stocks including biggies like Apple Inc. (AAPL), Google Inc. (GOOG) and Facebook Inc. (FB) that are traded over NASDAQ. Reportedly, it was the longest duration for which trading got halted on the Nasdaq. However, no money was lost due to the disruption.
This is not the first time that Nasdaq encountered such serious technical glitches. How can someone forget about the turmoil on the day of the much-awaited initial public offering of Facebook? In May 2012, a surge of order cancellations hindered the procedure of matching of buy and sell interest in the Facebook stock. This led to technical problems and delay in trading for 30 minutes. Later, Securities and Exchange Commission slapped a fine of about $10 million on Nasdaq for the hiccups in the IPO.
While the U.S. market is already blamed for its fragmentation, such technical interruptions raise concerns about the smooth functioning of electronic trading. Technology is the backbone of such electronic platforms. Thus, any disruption caused due to failure of technical expertise not only tarnish the reputation of securities exchanges, but bring it under the scanner of regulatory bodies, government, stock market participants and others who are directly or indirectly associated with it.
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