August 2013 NASDAQ flash freeze

[1] One week after the trading halt NASDAQ OMX credited the freeze to an overloading of the Securities Information Processor (SIP) caused by reconnection issues with the New York Stock Exchange Arca.

[2] The freeze received substantial media coverage and generated discussions on the security of increasingly technologically advanced stock exchanges.

[8] Prior to a public statement made by Nasdaq OMX released on the evening of August 22, there was speculation in financial markets as to the cause of the outage.

[2] On August 22, 2013, NASDAQ OMX released a brief statement citing a connectivity issue between an exchange participant and the SIP as the catalyst for the inability to distribute quotes.

[11] On August 29, 2013, NASDAQ OMX issued a statement detailing the causes of the trading halt, as well as admitting a degree of responsibility for the outage.

Of these issues they stated that “we are responsible for them, regret them, and intend to take all steps necessary to address them to enhance stability and functionality of the markets.” However, the statement also placed significant blame on the NYSE Arca system as the primary cause for the outage.

They took the position that Nasdaq was responsible for establishing and maintaining a system that could handle significant amounts of traffic and that a connectivity issue should not result in a closure of the entire exchange.

Many stakeholders believed that further issues at the reopening of the market would serve to damage investor confidence, and could lead to more substantial declines in the Nasdaq composite's value.

Ryan Detrick, a strategist with Schaeffer's Investment Research said of the matter: "The fact we didn’t see a larger dip on today’s mess shows most investors are, for better or worse, becoming more comfortable with these mistakes.

[1] Michael Farr also credited the nature of the freeze, being caused by an error between exchanges, as assisting in preventing sell offs and negative impacts on other markets such as gold.

"[1] However, the freeze raised further questions about the increasing risks posed by tech advances in the finance industry, contributing to potential dips in market confidence.

Some journalists and financial commentators suggested that the freeze was evidence of the need for industry wide cooperation in developing emergency procedures to cope with the issues posed by high frequency trading.

[17] Democratic New York Senator Chuck Schumer was quoted as saying that the freeze was indicative of increasing computerisation of trading firms and exchange systems, calling for regulators to consider "fundamental market structure reforms.

Particularly given that many significant stocks such as Apple, Facebook, Google, and Amazon are listed on the Nasdaq, the shut down caused substantial interruptions to financial firms.

It was suggested by some media outlets that the decision of Twitter to hold their initial public offering (IPO) on the NYSE was partially a result of the flash freeze.