Many Wall Streeters calmly carried on Thursday as the Nasdaq Stock Market, the second-biggest U.S. exchange, shut down trading in thousands of equities for more than three hours because of a computer problem -- the third major trading disruption in a week.
“There’s a lot of jokes going around about it,” Jamie Lissette, a trader in Westport, Conn., who moderates a private chat forum of professional traders. According to Lissette, people in the forum were passing the time wondering if the unexplained glitch had anything to do with Hollywood actor Richard Gere -- a nod both to an urban legend about that thespian’s experience with a gerbil, and the last major Nasdaq shutdowns, in 1994 and in 1987, caused by squirrels chewing through power lines. "We have 500 guys just sitting on their hands here," he said.
“The fact of the matter is, I’m surprised people don’t expect this to happen every five or 10 years,” Lissette added, explaining the computer systems underlying modern trading are so complicated, something is bound to break from time to time.
Officials at the all-electronic Nasdaq exchange, where trading volume is second to the rival New York Stock Exchange, halted trading in thousands of companies just before 12:15 p.m. New York time. A technical glitch in the computer system that disseminates quote information from Nasdaq to other trading platforms had caused “momentary interruptions” starting at 11 a.m., the officials said. A wider shutdown just after noon on Wall Street affected stocks of companies listed on Nasdaq, including Apple, Microsoft and Cisco Systems.
Trading of those securities was halted until 3:25 p.m. on Nasdaq’s platform, as well as on the New York Stock Exchange, regional exchanges like the Philadelphia Stock Exchange and rival electronic exchanges. Trading continued in private “dark pool” platforms, where large blocks of company shares are bought and sold by investors outside of the open exchanges.
Nasdaq gave no indication what caused the glitch, fueling speculation by traders that it may have been the result of a bank plugging a new high-frequency trading program into the exchange's servers. Others suggested the outage may be the work of malicious hackers.
Another possible cause was the deployment of a system meant to prevent wild fluctuations in the prices of stocks, which occurred across all U.S. exchanges this week, according to Sal Arnuk of Chatam, N.J.- based Themis Trading.
Arnuk explained that most traders' acceptance of the shutdown was partly good luck. No major market-moving events were scheduled for Thursday afternoon, and late summer is traditionally a quiet time on Wall Street.
“We have this going for us, it’s an August, quiet day with very little going on in the world,” Arnuk said “At the same time, when you stop trading, you create uncertainty.”
The shutdown was the third major trading disruption in a week, following a glitch linked to the trading arm of Goldman Sachs on Tuesday and a computer error that caused securities in the Shanghai stock exchange to swing wildly on Friday.
Not all traders accepted Thursday's glitch with resignation and humor.
"Our initial read was that something was wrong, that something nefarious was up," Jim Russell, senior equity strategist at U.S. Bank Wealth Management, told The Wall Street Journal. "As word leaked out that this was more of an IT glitch, we were somewhat relieved."
Nasdaq officials emphasized that only stocks listed on the Nasdaq platform were not being traded and that shares of companies listed on the New York Stock Exchange were not affected. Traders, however, said the malfunction temporarily affected all Wall Street trading.
Most Wall Street trading is done by computer programs that compare prices for several stocks before executing a transaction. While it was theoretically possible to trade New York Stock Exchange-listed shares of IBM, for example, most programmatic trading would not proceed unless quotes for other tech companies like Microsoft were also available, which wasn’t the case during the shutdown.
Trading in exchange-traded funds listed on the New York Stock Exchange, but which contain baskets of Nasdaq-listed stocks, also continued. A representative for BlackRock, the New York firm that manages the largest portfolio of exchange-traded funds, had no immediate comment.
Notwithstanding those issues, Lissette, the Connecticut trader, said Wall Street was taking the unexpected interruption in stride.
“It’s a little bit odd that it’s going into hours,” Lissette said during the interruption, “ But if what happened was some sort of fail-safe to prevent a flash-crash or a rip, I think people would much rather have that than have the market go down 30 percent.”
In a statement after the close of trading, Nasdaq said it was investigating the day's "issues" and would "support any necessary steps to enhance the platform" in the future.