Connectivity issue between Nasdaq and Arca preceded outage: source

Fri Aug 23, 2013 7:56pm EDT
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By Jed Horowitz, Lauren Tara LaCapra and Herbert Lash

NEW YORK (Reuters) - The vague "connectivity issue" that Nasdaq said triggered the outage that paralyzed a large part of the U.S. stock market on Thursday originated as a problem between Nasdaq and rival NYSE Arca, a source familiar with the matter said Friday.

Nasdaq said the problem started shortly before midday Thursday and quickly cascaded through its Securities Information Processor, or SIP, the system that receives all traffic on quotes and orders for stocks on the exchange, preventing it from disseminating quotes.

The source, who spoke on condition of anonymity, said brief outages between exchanges occur from time to time but are short-lived.

In such instances, traders receive alerts from an exchange that essentially tell them to rout their order flow elsewhere for a period. Most of these episodes, which may occur several times a week, are resolved quickly.

Nasdaq did not respond to requests for additional information beyond a statement issued to traders on Friday. A spokesman for NYSE Euronext, the parent of the New York Stock Exchange and its NYSE Arca platform, denied Arca was involved.

Nasdaq Chief Executive Robert Greifeld, in television interviews on Friday, declined to identify the source of the connectivity problem.

The precise nature of the breakdown remains unclear.

But the outage, first flagged at 11:48 a.m. EDT (1548 GMT), quickly spiraled out of control and soon left $5.9 trillion of U.S. equities - more than a third of the U.S. stock market - idle for more than three hours. Shares of three of the five largest companies by market value, Apple Inc, Google Inc and Microsoft Corp, typically also among the most active in any session, were unavailable.   Continued...

A woman holds an umbrella past the Nasdaq MarketSite in New York's Times Square, August 22, 2013. REUTERS/Lucas Jackson