Nasdaq OMX Group Inc. issued a deeper explanation for the technical problems that halted trading for three hours last week.
As Reuters and Bloomberg explain it, Nasdaq's systems were overwhelmed when ARCA, the all-electronic exchange owned by the NYSE, deluged it with data. The vast amount of data exposed a "latent flaw" in the Nasdaq system that "receives all traffic on quotes and orders for stocks on the exchange."
"Today's report amplifies previous public statements by Nasdaq about what led it to freeze trading in about 3,300 stocks both on its own platform and others where equities change hands in America. The disruption underscored how quickly the integrity of the U.S. market, which has a value of about $20 trillion, can be subverted as orders to buy and sell shares are matched on more than 50 exchanges and alternative electronic venues.
"'Any piece of software, even if it's run for 100 percent for 10 years, there's still flaws in it.,' Nasdaq CEO Robert Greifeld said in an interview with Bloomberg News. 'Whatever you have, it's a question of what unique set of circumstances happen to reveal that.'"
In its statement, Nasdaq did call the unprecedented outage "unacceptable."
"Nasdaq has changed the way it manages a key data feed to avoid another market freeze, people close to the exchange told the Journal. The people said they believe a repeat of the incident couldn't happen.
"Nasdaq said Thursday its data feed providing price information for Nasdaq-listed securities failed last week when it couldn't switch to a backup system after being flooded with messages from an electronic exchange run by rival NYSE Euronext NYX +0.34% .
"Nasdaq staff have since removed software that automatically reconnects other exchanges that are having problems connecting to the feed, the people close to the exchange said, and are managing such connections manually to better protect the feed from another breakdown."