Thirty minutes into the crippling outage that hobbled the Nasdaq stock market on Thursday afternoon, stopping all trading in $5.9 trillion worth of U.S. equities, exchange officials had the problem fixed. It was another two-and-a-half hours, however, before they were ready to flip the switch and turn the all-electronic market back on.
Most of the 191 minutes that the exchange was dark was spent in sometimes frantic conversation with scores of banks, brokers, investment companies and rival exchanges who wanted Nasdaq's assurance that a restoration of trading would be orderly and would not lead to panic. "We had to make sure all the exchanges were connected to us successfully and if the firms on the outside could get in," said one Nasdaq official who spoke on condition of anonymity.
Meanwhile, banks' trading desks were cautioning Nasdaq, operated by Nasdaq OMX Group Inc (NDAQ.O), not to rush to reopen, fearing that a restart full of technical errors would only sap more confidence from rattled markets, according to three sources at brokerages and banks who declined to be identified.
In the end, the reopening of trading did go relatively well. Transactions first restarted at 3 p.m. EDT (1900 GMT) in a single microcap stock, Atlantic American Corp (AAME.O), a test case picked for its front-of-the-alphabet ticker. Twenty-five minutes later, the rest of the market opened, and, according to a Nasdaq statement, "The trading day finished in normal course."
Shares of Nasdaq itself, which initially fell by more than 5 percent when trading resumed, recovered some of their lost ground to close the day 3.4 percent lower. The widely tracked Nasdaq Composite Index gained nearly 1.1 percent.
While the worst case scenarios may have been averted, the outage still stands as among the most serious in a series of recent technological failures to hit the U.S. securities business, including a software issue at the Chicago Board Options Exchange this spring that delayed the start of trading there for half a day.
It was also the latest black eye for Nasdaq, which in May agreed to pay $10 million, the largest penalty ever against a stock exchange, to settle