NEW YORK – A communications outage at the New York Stock Exchange (search) in the critical final minutes of trading Wednesday and the exchange's refusal to immediately detail what went wrong frustrated customers and exposed frailties of its electronic systems.
On Thursday, NYSE Chief Executive John Thain (search) told Reuters Television that the problem occurred when the exchange's computer system and its backup were overwhelmed by an error message that duplicated millions of times.
The exchange has taken steps to correct the problem and it shouldn't happen again, Thain said.
Still, Thain on May 12 had told a Reuters Summit that the exchange relies on a communications system that "can tolerate multiple faults across the system."
The glitch on Wednesday prompted the New York Stock Exchange to halt floor trading four minutes before the scheduled 4 p.m. close, which is a time when many customers rush to fill orders.
"I don't think last night's event was fraught with potential disaster," said Robert Morris, director of equity investments at Lord, Abbett & Co., which manages assets of about $90 billion.
"On the other hand, it does make you wonder" what would happen "if we had a market-driven event where things are going at a thousand miles an hour," he said, adding that his traders were "miffed" because of the pressure to get good prices.
Morris also noted that NYSE rival Nasdaq has had similar trading disruptions. A Nasdaq spokesman did not immediately provide details.
And others said the situation may have been more dire.
"If it had been options-expiration Friday, then there would have been all sorts of difficulties," said Cummins Catherwood, managing director of Walnut Asset Management. "God knows what would have happened because there is an enormous amount of money that is traded at that time. I think we dodged a bullet,"
The glitch was related to the Securities Industry Automation Corp. (search) , or SIAC, an electronic system that disseminates market data and runs computer trading systems. SIAC is a technology center jointly owned by the NYSE and the American Stock Exchange. Trade at the Amex was also disrupted.
On Wednesday, the NYSE issued only a three-sentence statement, more than an hour after trade was halted, that cited a "communications problem."
In April, the NYSE struck a deal to acquire Archipelago Holdings Inc. (AX) in a bid to gain a competitive electronic trading platform and become a public company. The move came as the Big Board faces increasing competition from more nimble electronic rivals.