Glitch Halts Trading on NYSE
In a rare technological black eye for the world’s biggest stock market, a malfunctioning computer switch forced a 59-minute halt in trading Monday on the New York Stock Exchange.
Although the NYSE described the glitch as an isolated hardware failure, the mishap highlighted the exchange’s--and indeed the entire industry’s--vulnerability to such gremlins as global securities trading grows increasingly automated.
The shutdown also cost NYSE member firms an undetermined amount of money in lost business. Officials said that as of late Monday they were aware of no complaints from investors about incorrectly priced or otherwise bungled trades.
Still, some investors may have made trades based on incomplete price information, experts said.
Overall, blue-chip stocks--most of which call the NYSE home--were little changed Monday. The Dow Jones industrial average eased 20.08 points to 8,432.21.
But the NYSE’s problems, which began about 40 minutes before the actual trading halt at 1:16 EST, quickly spilled over into other markets that trade in Big Board-listed stocks, including the American, Chicago and Pacific stock exchanges, as well as markets that trade in futures and options based on NYSE stocks.
Trading in NYSE-listed stocks continued sporadically on the regional exchanges but at nothing close to normal volume.
Final volume on the Big Board was 610 million shares, making it the lightest day since Aug. 24. It had started out as a slow day anyway, but there was no question that the trading halt robbed the exchange of business it otherwise would have enjoyed.
“We missed probably 150 million shares of volume,” estimated William Hackett, chief of equity trading at Furman Selz. “You hate to have that happen, but it’s just one of those things,” he added, noting that just three weeks ago, the Big Board handled three days in a row of billion-share-plus volume without a hitch.
An NYSE official dismissed as “apples and oranges” any comparison of Monday’s troubles with the year 2000 problem, or Y2K, which some experts think threatens costly and dangerous computer crashes when programs fail to distinguish between the dates “1900” and “2000.”
Monday’s glitch “has absolutely nothing to do with the Y2K issue,” said William A. Bautz, the NYSE’s chief technology officer. He added that the exchange, which is in the process of extensive Y2K testing, believes its systems will be error-free at the turn of the century.
Monday marked a rare instance in which equipment trouble has halted NYSE trading in midstream, although a software problem caused a one-hour delay in the opening of trading on Dec. 18, 1995. Before that, a power outage in New York shut down NYSE trading for 24 minutes on Oct. 22, 1991.
The NYSE’s main rival, the Nasdaq Stock Market, which touts its high-tech trading system, continued trading Monday despite the NYSE’s problems.
Nasdaq officials, however, refrained from gloating. Their system, too, has been hit by hardware snafus in recent years.
Monday’s trouble on the Big Board began about 12:35 p.m. EST, when three-quarters of the NYSE’s stock “specialists”--the human auctioneers through whom all Big Board trading flows--suddenly found themselves unable to obtain accurate information on orders coming to the floor from the exchange’s computers.
For about 40 minutes, while the specialists were flying half-blind, the exchange’s technical staff tried to identify and correct the glitch. When officials determined that the computer system had to be shut down, they ordered trading halted at 1:16 p.m.
For many NYSE floor traders, it amounted to an extra-long coffee break. Workers flowed onto Broad Street outside the exchange’s main entrance, gossiping and smoking cigarettes while waiting for the glitch to get straightened out.
Inside, Bautz and other technicians had trouble quickly locating the faulty switch, he said, because its malfunction caused it to send a “storm” of data across the whole system, disguising its whereabouts.
Normally, a failed switch would have been automatically bypassed within a minute or two, Bautz said. That normal backup didn’t occur because rather than failing outright, the switch continued to function, though on the fritz.
Once the faulty switch was located, the software program that operates the system had to be reconfigured before the system could be turned on again.
Trading was resumed at 2:15 p.m. EST.
By coincidence, the NYSE is in the process of replacing these switches, which are about 10 years old--elderly in computer terms.
About one-quarter have already been replaced, which is why some of the specialists’ posts continued to function Monday. Within about a month the rest of the switches will be replaced, the NYSE said.
The NYSE’s computer system is operated under contract by Brooklyn-based Securities Industry Automation Corp., which is two-thirds owned by NYSE and one-third by the American Stock Exchange. However, the Amex’s trading system was not affected.
