Systems glitch brings NYSE trading to a halt

The New York Stock Exchange was forced to halt all of its trading for more than an hour this morning because of a data connectivity glitch that continued to affect about 10% of the stocks listed by the exchange until midafternoon.

The connectivity problem primarily impacted the delivery of small buy-and-sell orders to systems on about half of the NYSE's trading floor, according to a statement posted on the exchange's Web site. Trading of all stocks was stopped at 10 a.m. EDT and didn't resume until 11:35 a.m., about 20 minutes later than the restart goal initially set by the NYSE.

"We lost connectivity between our data sites and the trading floor," said Richard Grasso, the NYSE's chairman and CEO, as part of today's statement. "We could have continued trading with other than our systemic traffic but did not feel this was fair, particularly to the retail investor."

Even after trading began again, the exchange said it continued to have "isolated problems" getting data to two of the trading posts on its floor. Trading of some stocks was still being hampered as a result, according to the NYSE, which updated its statement this afternoon to say that the remaining problems were finally fixed at about 2:30 p.m. EDT.

The NYSE didn't comment in detail on the cause of the connectivity problems, but Grasso said during an interview on the CNBC television channel that the glitch was related to an unspecified software change made last night. The exchange noted in its statement that a similar snafu led to an hour-long trading halt in late 1998.

Rival Nasdaq Stock Market Inc. suffered a 20-minute outage earlier this week when system problems cropped up during a capacity upgrade. Meanwhile, Washington-based Nasdaq today launched a European trading system that's aimed at converting institutional traders in that region from telephone transactions to online ones.

Most of the technology behind the Nasdaq Europe exchange was in place when Nasdaq acquired majority ownership of the pan-European Easdaq stock market at the end of March. Easdaq had implemented a trading system based on Tibco ActiveExchange, a middleware tool developed by Tibco Software Inc. in Palo Alto, Calif.

Nasdaq itself uses Tibco's software in the U.S., said Ann Neidenbach, who was named to be CIO at the Nasdaq Europe unit after the deal with Easdaq. "We have experience operating this kind of environment with the [same] underlying architecture," Neidenbach said. "We were actually pleasantly surprised."

During the next 12 months, Nasdaq Europe also plans to deploy Nasdaq's new SuperMontage front-end trading system, which is supposed to give traders more detailed information than they get now. The software was approved earlier this year by the U.S. Securities and Exchange Commission and is expected to be ready for use early next year (see story).

Damon Kovelsky, an analyst at Meridien Research Inc. in Newton, Mass., said the real test of Nasdaq Europe's technology probably won't come until September, after Europeans return from their summer vacations. That may be a good thing, Kovelsky added, because it will let the stock market fine-tune its systems during a relatively slow trading period.

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