The Nasdaq stock market shut down trading today following a technical problem. The exact nature of the problem isn't known. Given the huge percentage of automated high-frequency trading that happens a technical glitch can be a huge problem.
Man, when the markets just stop, you get an eerie flatline that looks like someone's heart stopped beating:
Nobody seems to know quite why, but according to the WSJ, the feeds that provide data to traders had a hiccup. The exact cause isn't known.
While we have no reason to believe that there might be a malicious attack underway, the exchange has been repeatedly compromised by hackers.
According to MarketWatch:
Trading in Nasdaq-listed stocks and options will resume after a "halt cross with a 5-minute quote only period" at a time yet to be determined.
We believe (tell us if we're wrong!) that this means that the market will open without trades so that the quotes have time to stabilise before everyone starts spending again
Also, it's important to note that this isn't one of those cases in which trading is halted because high-speed bots send the market into a tailspin.
According to the Nasdaq system status page it looks like the first signs of a hiccup cropped up at 11.45AM EST. The service was shutdown a half hour later.
So this has happened before. Here's your Herald-Journal dated October 10, 1995
And actually today's failure sounds a lot like a three-hour shutdown back in October 1999
Here's the Associated Press, June 30, 2001
According to Nasdaq, the quote only period will resume at approximately 2.45pm EST, with regular trading continuing at 3.10pm. That puts today's halt at just under three hours.
Looking through the archive, the length of this particular glitch is on par with some of those in the past. In fact the problem with the quoting system sounds very similar to onet that happened last year. From the WSJ, April 28, 2011:
Trading in more than 80 securities was halted early Monday after one of Nasdaq's algorithms fed incorrect quotes to market makers. On Wednesday, Nasdaq acknowledged the halts were "caused solely by a Nasdaq malfunction," which resulted in the release of "invalid and stale market data" in the first half hour of trading.
But last year's outage was only 80 stocks.... Update 9:
In the end we look something like this.
The 15-minute quote period just started supposedly. Some trading will begin at 3pm EST with all trading resuming at 3:10 if all goes well.
Let's do this.
So when Nasdaq starts trading, it wisely doesn't start trading everything all at once. So at 3pm EST, it actually only released Atlantic American Corporation, which has been trading properly. This is a lot like the way that services like Facebook roll features out slowly to make sure there aren't any problems.
And we're off...
It appears that trading is moving. I'm no finance expert so I don't know what up means now, versus other times.
So where does that leave us? From the point of view of technology hiccups like these are really troubling. Downtime is an issue everyone wrestles with, but there's a big difference between an Amazon or Facebook outage and a Nasdaq outage. There's good news and bad news. The good news is that Nasdaq's fail-safe measures kicked in and the market was halted before any damage could be done. The bad news is that glitches are happening too often.
When the technologies fail and money vanishes from a company's market capitalisation, we're not really talking about companies and executives — we're talking about people whose lives rely on the stability of those systems. People whose hard-earned money is invested for retirement. Maybe we need better tech, and maybe the tech needs to be better regulated. What's sure, is that we need to do something.