The problem arose earlier in the day when market participants were entering quotes for Microsoft after a trading halt for material-news dissemination, which is when traders pass around news that might dramatically affect a stock's price. Nasdaq says its quotation system began faltering and was couldn't be fixed, so SelectNet and SOES, the company order-routing systems, were shut down. Within five minutes of the shutdown Nasdaq fixed the quotation systems, and all the data feeds and pricing were operating without a hitch. SelectNet and SOES were reopened at 3:30.
Dana Stiffler, an analyst with AMR Research, says that it's never a surprise when trading systems go down, but this type of technology glitch is more serious. "If SOES and SelectNet go down and the quotation system is up, you can process the trades through alternative networks like Instinet and Island," Stiffler says. "If the quote system is down, there's no indication of price, and that hurts everybody."
This is the second tough day for Nasdaq this week. Earlier, the company said that in response to the slow economy it would lay off 10% of its workforce, or 140 jobs. The company says none of those cuts will affect its plans for technology development.
Nasdaq canceled its usual after-hours trading session.