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Failed UTP SIP system shutters Nasdaq trading

Fails to deliver on first slated reopening; trading now slated to resume about 3:10 p.m.

Nasdaq's unprecedented trading halt today stemmed from a technical glitch with a core data feed that disseminates market data for Nasdaq-listed securities.

The feed is part of the exchange's UTP SIP system for Unlisted Trading Privileges Securities Information Processor.

The broken system allows Nasdaq to send and receive quote and trade information on Nasdaq listed securities with other exchanges including the New York Stock Exchange, Chicago Stock Exchange and BATS Global Markets. Unlisted Trading Privileges permit other exchanges to trade in Nasdaq-listed securities,

According to an official description , "UTP SIP data feeds consist of one network, Tape C, which is the single source of consolidated market data for Nasdaq-listed securities." It provides continuous quotes and last sale information from all market centers trading Nasdaq-listed securities.

The NASDAQ OMX Group, Inc. today halted halting trading on all Nasdaq-listed securities at 12:14 p.m. The alert posted at 12:14 pm. ET noted that trading would resume later Thursday but did not specify when exactly that would happen.

CNBC reported that trading was to resume at 2:45 p.m. ET. That proved overoptimistic. The exchange is now expected to open about 3:10 p.m.

A Nasdaq alert reported that the UTP SIP is being modified to accommodate new data sets. The new Sale Condition Modifiers and Financial Status Indicators are said to be set for an Octomer rollout.

The Wall Street Journal's Market Watch described the trading halt as "extraordinary," affecting more than 2,000 companies including Google, Amazon, Microsoft and Cisco. Market Watch noted that the combined worth of companies affected by the trading freeze was around $5.7 trillion.

According to the Journal, the Nasdaq freeze has prompted other exchanges to stop trading Nasdaq-listed tocks, exchange-traded funds and options.

A spokesman from the New York Stock Exchange confirmed that the exchanged had halted trading in Nasdaq listed issues. "I can confirm that we have halted equities trading in Tape C (Nasdaq-listed) issues as well as any options based on Tape C securities, however, any comment would need to come from Nasdaq," the spokesman said in an email.

John Nester, spokesman for the U.S. Securities and Exchanges Commission said the regulatory body is keeping an eye on the situation. "We are monitoring the situation and are in close contact with the exchanges," Nester said in an email.

This is not the first time that Nasdaq has run into problems with the UTP SIP.

In January, Nasdaq briefly shut down trading while it investigated that cause for stale data on UTP SIP. The problem resulted in Nasdaq-listed trades not being recorded in real-time according to a description of the problem by Securities Technology Monitor.

Jaikumar Vijayan covers data security and privacy issues, financial services security and e-voting for Computerworld. Follow Jaikumar on Twitter at @jaivijayan, or subscribe to Jaikumar's RSS feed . His email address is jvijayan@computerworld.com.

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