Nasdaq market halts for three hours

An unexplained technological glitch shut down Nasdaq securities Thursday for three hours, causing trading in thousands of U.S. stocks to come to a halt -- the latest in a series of prominent disruptions in U.S. markets.

Nasdaq resumed trading at around 3:25 p.m. EDT, after a roughly three-hour, 11-minute pause in trading in more than 3,000 U.S. companies.  

"I can't remember this happening in recent memory," said Christopher Nagy, president of consultancy firm KOR Trading and a former head of trading at TD Ameritrade.

All traffic through Nasdaq stopped abruptly at 12:14:03 p.m. Nasdaq's own stock (NDAQ.O), which was up 0.8 percent before the halt, closed down 3.4 percent after earlier trading down as much as 5.4 percent.

The exchange blamed the shutdown on a problem with distributing stock quotes. A source familiar with the matter described the problem as a "data feed issue."

During the shutdown, trading of shares not listed on Nasdaq continued, but transactions could not be executed on the Nasdaq platform. Options trading was also halted.

In all, Nasdaq lists about 3,200 companies.

The U.S. Securities and Exchange Commission said it was in touch with the exchanges, with Chairman Mary Jo White overseeing developments from her home office near New York City.

White House spokesman Josh Earnest said President Barack Obama had been briefed about the disruption, during which investors had limited market access.

"As we continue to eliminate human beings from the execution of security trading, this is the problem you run into," said Stephen Massocca, managing director of Wedbush Equity Management LLC in San Francisco. "These events are going to take place, given the level of automation."

The outage was the latest black eye for Nasdaq, which in May agreed to pay $10 million to settle SEC civil charges over its mishandling of Facebook's initial public offering -- the largest penalty ever levied against a stock exchange.

James Angel, a Georgetown University finance professor who sits on the board of rival exchange operator Direct Edge, said Nasdaq appeared to take steps to ensure that trading reopen in an orderly fashion and with correct pricing.

"We can live with the market being closed for a little bit, but we can't live with bad pricing," he said. "It's far better to have the market shut down and take its time re-opening, than to have what happened with the Facebook incident... It looks like they've learned their lesson."

William Lefkowitz, options strategist at National Securities in New York, said the reopening was "very orderly and liquidity is back to normal. It is almost like it did not happen."

Thursday's outage was the latest high-profile glitch in U.S. stock markets.

On Tuesday, a technical problem at Goldman Sachs Group Inc. resulted in a flood of erroneous orders in U.S. equity options markets. Two weeks earlier, on August 6, stock exchange operator BATS Global Markets faced a nearly hour-long outage.

In 2012, a trading blowup at Knight Capital Group Inc. was a contributing factor to the eventual sale of that company.

Other trading venues were also affected by Thursday's outage. Several "dark pools," which execute orders anonymously, were forced to stop trading, several market participants said.

"The frequency of technical issues affecting trading is a wake-up call to business leaders in capital markets," said Lev Lesokhin, executive vice president of Cast, a specialist in business software analysis. "They need to carefully scrutinize the structural integrity of their software systems."

Al Jazeera and Reuters