New software backfires in New York stockmarket

NEW YORK, The Washington Post

Computer problems brought trading on the New York Stock Exchange, the world’s largest stock market, to a halt for 85 minutes Friday, a glitch that rippled through other markets as well.

Computer-related trading halts are rare on the NYSE. It has only had two other such incidents in the last 10 years, and the one Friday was the longest in exchange history.

The NYSE action also impacted the ability of investors to calculate market indexes, and thus stopped some trading at the American Stock Exchange and some futures and options markets. Trading even slowed on the Nasdaq Stock Market, because investors were hesitant to do business without information generated from NYSE trading.

Even after trading generally resumed, about 10 percent of stocks had a sharply abbreviated trading day — some shorter than two hours. The incident highlights the extent to which stock trading, once mainly done face-to-face in trading pits, is dependent on computers and telecommunications.

The computer problems cut into trading volume on the NYSE, which had its slowest day of the year. Only 723 million shares changed hands on the Big Board, compared with the usual 1.2 billion.

The Dow Jones industrial average finished at 10,977, down 113.74 points, or about 1 percent. The Nasdaq composite index dropped 48.90 to 2,215.10, an almost 2.2 percent loss. The Standard & Poor’s 500-composite index fell about 1 percent, down 12 at 1,264.96.

NYSE chairman and chief executive Richard Grasso said that investors, who trade billions of dollars each day on the NYSE, expect the exchange to operate flawlessly. “We have a military expectation of perfection,” he told reporters.

The exchange has spent US$2 billion over the last 10 years updating its computer system, which includes a sophisticated backup system. Grasso said the NYSE is still investigating to find out what went wrong. The Securities and Exchange Commission said it expects to review a report from the exchange on the incident.

Many traders and investors seemed to take the computer glitch in stride. Some said they were able to use independent electronic-trading networks for trades that needed to be executed, although many were hesitant to do so, because they depend on the enormous crowd of NYSE traders to set a fair price.

During the pause traders on the NYSE floor, who normally spend their day frantically running from post to post, enjoyed “an extended coffee break,” said Ted Weisberg, founder of Seaport Securities.