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Glitch hits Nasdaq system at center of trading outage

Taxi cabs drive past the Nasdaq MarketSite in New York's Times Square, August 23, 2013. REUTERS/Andrew Kelly
Taxi cabs drive past the Nasdaq MarketSite in New York's Times Square, August 23, 2013. REUTERS/Andrew Kelly

By John McCrank

NEW YORK (Reuters) - Nasdaq OMX Group said the system at the center of the Nasdaq exchange's three-hour trading halt on August 22 had a six-minute outage on Wednesday for a small number of stock symbols, but the issue had been resolved and trading was not affected.

The Securities Information Processor (SIP), which receives all traffic on quotes and orders for Nasdaq stocks, was down between 11:35 a.m. and 11:41 a.m. Eastern time for symbols from PC through SPZ, the exchange operator said in a note to traders.

While Nasdaq said trading was not affected, exchange operator Direct Edge said it temporarily halted trading in Nasdaq-listed securities ranging from PBCP through ZZZZ between 11:43 a.m. and 11:48 a.m.

The U.S. Securities and Exchange Commission said it was in contact with Nasdaq and monitoring developments.

The issue was not related to the August 22 Nasdaq outage, when a software bug and other technology issues in the Nasdaq-run system was triggered by connection problems with NYSE Euronext Inc's Arca Exchange, a person familiar with the matter said.

In that instance, the SIP was unable to revert to a backup system and trading was halted in all Nasdaq-listed securities, including names like Apple Inc, Google Inc, and Facebook, for three hours.

Nasdaq acknowledged on Thursday that it was ultimately responsible for the trading halt.

The latest outage was due "to hardware memory failure in a back-end server," but a backup system successfully kicked in and the issue was resolved, Nasdaq said.

The exchange said last week it was in the process of identifying potential design changes to make the SIP more resilient "including architectural improvements, information security, disaster recovery plans and capacity parameters."

Following a committee meeting on Wednesday, Nasdaq outlined a number of proposals including that it would manually shut off connections to other exchanges and market participants in the case of unusually high traffic clogging the data feed and that it recommended more frequent stress testing.

"Our objective is to learn from the events and work together to identify appropriate solutions that improve the reliability, governance and operations of the SIP," Nasdaq said.

Nasdaq plans to present its initial recommendations for change to the SIP governing committee, made up of U.S. exchanges and the Financial Industry Regulatory Authority, within the next month.

SEC Chair Mary Jo White has called a meeting with the heads of exchanges on September 12 to address the glitch. The meeting in part will focus on ensuring SIP technology is robust enough.

(Reporting by John McCrank; Editing by Diane Craft, Carol Bishopric and Chris Gallagher)

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