Tech Glitches Disturb NYSE Trading Friday
NEW YORK – Technical glitches forced the New York Stock Exchange to shut down completely for much of the morning Friday in a snafu that rippled through other U.S. exchanges and sidelined billions of investor dollars.
A halt for any reason during the trading day is a rare event at the world's biggest equity market, which has kept its floor open amid blizzards and hurricane scares. The Big Board particularly prides itself on its technology and often boasts its systems can handle many times the average daily volume of 1.2 billion shares.
But Friday, a problem in new trading software that the Big Board installed overnight caused failures in trading on half of the floor of the exchange in the morning, so the NYSE decided to shut down the entire floor at 10:10 a.m. ET. It reopened 85 minutes later at 11:35 a.m. ET.
It was the first time a system glitch shut down the exchange -- a pinnacle of Wall Street stability and tradition -- since Oct. 26, 1998.
System problems persisted into the afternoon at two of the Big Board's main trading stations, which handle about 10 percent of the 3,500 NYSE issues, shutting down trading in some stocks until 2:26 p.m. ET.
The New York Stock Exchange announced it resumed trading in all its stocks at 2:26 p.m. ET after fixing system problems that caused it to halt trading almost an hour and a half on Friday morning.
The stocks that remained closed after the halt, including International Business Machines Corp., were brought back incrementally, a Big Board spokesman said.
The NYSE, which plans to perform diagnostic tests on its systems throughout the weekend, has performed about 1,000 software upgrades like the one that caused today's problems in the past three years, NYSE chairman Richard Grasso said at a news conference after the close of trading.
``This institution is a purveyor of the best software and hardware from the best providers in the world .... the responsibility for the performance of this technology rests with me,'' Grasso said.
The Dow was off about 35 points before the NYSE called the morning halt. When trading resumed at 11:35 a.m. ET, the blue-chip index dropped 84 points, or 0.76 percent, to 11,006. International Business Machines Corp., one of the 30 components of the Dow Jones industrial average resumed trading at around 1:40 p.m ET, which was the first time on Friday a complete average of the blue-chip index was available.
About 723.5 million shares had changed hands on the floor of the exchange during the trading day, about 60 percent of normal volume. The Dow fell 1.03 percent, or 113.74 points, to 10,977 during the day.
"Anytime there is a problem, it tarnishes the organization's image," said Joe Stocke, chief investment officer at StoneRidge Investment Partners, which manages $1 billion. "There is a strong motivation to fix the problem quickly and to reassure the public that the problem will not recur."
But Robert Cutro, a managing director at Lehman Brothers on the Big Board's floor, disagreed. ``I don't think it's embarrassing, I just think it's a fact of life that every once in a while these things happen.''
The NYSE remained opened in September 1999 when Hurricane Floyd was racing up the East Coast and many New York businesses, including some of Wall Street's biggest names, sent employees home early. The NYSE did curtail its trading day by 3-1/2 hours during a blizzard in January 1996, a day off for many workers in New York.
The Big Board's glitch had a ripple effect. The Chicago Board Options Exchange halted trading in its individual and index options based on New York Stock Exchange stocks.
The CBOE also stopped trading in its Standard & Poor's 500 and 100 index options, although CBOE options based on NASDAQ-listed stocks were unaffected by the trading stoppage.
At the American Stock Exchange, the second-biggest U.S. stock options exchange, trading in New York Stock Exchange-based stock options halted. The halt also curtailed trading in about 90 percent of the AMEX's 100 exchange-traded funds, such as Standard & Poor's Depositary Receipts and other ETFs that contain NYSE-listed stocks.
The Philadelphia Stock Exchange stopped trading in New York Stock Exchange stocks as well as options during the halt. In California, the problems forced the Pacific Stock Exchange to halt trading in NYSE issues until the system was fixed.
Trading in NYSE issues kept going on alternative trading systems like Archipelago and the Island ECN, officials said.
The Big Board's failure came just days after the NYSE said its first-quarter profits fell nearly 5 percent as it spent money to upgrade its trading-related systems. During the quarter, the Big Board converted all of its stocks to decimals from fractions, completing a shift it started in August 2000.
``My concern is limited, and I suspect that most investors will see this as a consequence of technology, not as an indictment of the NYSE,'' said Charlie Crane, strategist at Spears, Benzak, Salomon & Farrell. ``If anyone loses faith in the markets because of a glitch like this, they didn't have much faith to begin with.''
Earlier this week, the trading system of Nasdaq, the NYSE's main rival, broke down for about 20 minutes, as the No. 2 U.S. equity market was working on increasing the system's capacity.
Nasdaq, which trades more than 1 billion shares a day on average, recently has encountered problems with SelectNet. The system went down for about 15 minutes in March, and a handful of erroneous trades entered into the system in February caused the Nasdaq Composite Index to falsely spike up 14 percent.
Systems problems earlier this week also hit exchanges across the Atlantic. Euronext, the trading platform for the merged Paris, Brussels and Amsterdam exchanges, stopped trading several times in the last two days because of technical problems.
Reuters and the Associated Press contributed to this report.