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Nasdaq suffers shutdown
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June 29, 2001: 6:39 p.m. ET
No. 2 stock market extends trading one hour after technical glitch
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NEW YORK (CNNfn) - The chief executive of the Nasdaq Stock Market, home to many of the nation's biggest technology stocks, said human error took down its trading systems Friday, forcing the No. 2 stock market to stay open late.
Hardwick Simmons, Nasdaq's CEO, said a technician at WorldCom, which operates Nasdaq's network, ran a test that inadvertently took the network down and precluded the use of a password to bring the system back up.
At about 2:30 p.m. ET, the problem shut down Nasdaq's small-order execution system, which handles retail trades, and one that handles larger orders.
"Once we discovered that, we brought the network back up and we closed at about 5," Simmons told CNNfn's Street Sweep. "Very unfortunate afternoon."
The two trading systems account for about half of trading volume on the electronic stock market.
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 Wick Simmons, CEO of Nasdaq, issues early comments on the problem. |
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Only partial Nasdaq trading occurred for the second half of the afternoon. And then at 4 p.m. -- just when the stock market would normally close -- the Nasdaq didn't, re-opening in fits and starts until just before 5 p.m. when trading finally ended.
The problems occurred on what is typically a busier than average trading day. Friday was the last trading day of the second quarter, a time when many large institutional traders such as mutual fund managers close out positions. The day also marked the annual rebalancing of the Russell 2000 index – an event that causes index fund managers to sell outgoing stocks and buy incoming stocks of the small-cap index.
"They were up for a period of time between 3 and 4 o'clock and then we had to take them down again," Simmons said of the market's trading systems. Nasdaq canceled its after-hours trading session.
The problems, whose details emerged slowly, caused some unusual moments Friday afternoon. The Dow Jones industrial average, which includes the Nasdaq stocks Intel (INTC: Research, Estimates) and Microsoft (MSFT: Research, Estimates) , fluctuated for an hour after the New York Stock Exchange closed.
But the Nasdaq composite index remained stuck higher at 2,169.31, not recalibrating. The index didn't move from about 2:30 until just before 5, when it finished up 35.08 points, or 1.6 percent at 2,160.54.
ECNs pick up trading slack
Electronic communications networks, or ECNs, were able to trade during this Friday afternoon in summer when many investors had already wrapped up business.
"We're basically finished up for the day," Larry Lawler, trader at Dreyfus, told Street Sweep.
Still, the problem, the Nasdaq's second in two days, affected at least one other trading desk. "We're shut down right now," Mike Murphy, head of equity trading with First Union Securities, told CNNfn's Street Sweep.
The glitch for the Nasdaq comes amid a relatively good time for tech stocks.
The index Friday wrapped up its first winning quarter in more than a year, but still remains more than 50 percent below its all-time high of 2000.
Less than one month ago, the New York Stock Exchange suffered a trading glitch of its own. On the morning of June 8, the NYSE shut down for about 80 minutes after an overnight software upgrade resulted in no transactions for many listed stocks.
On Thursday, Nasdaq had intermittent problems with its quotation system that resulted in a shorter halt for the SOES and SelectNet systems, the same ones that were shuttered Friday.
"We did not come up with the problem as quickly as we should have," Simmons. "For me it's terribly disappointing to have a problem of any kind."
But "Monday should be a clean day," he said.
Simmons said the two problems were unrelated. 
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