Latest technical glitch brings Nasdaq trading to a halt

By Chuck Mikolajczak and Rodrigo Campos

NEW YORK (Reuters) - Trading in shares of more than 3,000 U.S. companies listed by Nasdaq, including Google, Apple and Microsoft, was abruptly halted shortly after midday on Thursday because of a technical problem, the latest black eye for the U.S. securities trading business.

All traffic through Nasdaq stopped at 12:14 p.m. (1614 GMT), the exchange said on its website, citing a problem distributing stock price quotes. A source familiar with the matter described the problem as a "data feed issue."

Rival exchanges halted trading of Nasdaq-listed shares shortly afterward at the request of Nasdaq, the second-biggest U.S. stock exchange operator.

Options trading was also halted, the exchange added.

The interruption means that investors had very limited market access to trade such familiar names as Apple Inc , Facebook Inc and Microsoft Corp . In all, Nasdaq lists about 3,200 shares.

"I can't remember this happening in recent memory," said Christopher Nagy, president of consultancy firm KOR Trading and a former head of trading at TD Ameritrade .

"As we continue to eliminate human beings from the execution of security trading, this is the problem you run into," said Stephen Massocca, managing director of Wedbush Equity Management LLC in San Francisco. "These events are going to take place, given the level of automation."

Trading of shares not listed on Nasdaq continued, but transactions could not be executed on the Nasdaq platform.

Major market gauges such as the Nasdaq Composite Index and Nasdaq 100 were also affected. The composite had been up 0.87 percent when the disruptions struck and the 100 index was up 0.75 percent.

The broader Standard & Poor's 500 index, which includes around 100 stocks listed on Nasdaq and as a result were not trading, was up about 0.75 percent on the session.

Nasdaq declined to comment immediately beyond the electronic alerts it was issuing to traders. When trading resumes, estimated to be around 2:30 p.m., Nasdaq said it will precede the start with a 15-minute period when only price quote traffic will be permitted, not actual trades.

The New York Stock Exchange's parent, NYSE Euronext , ceased all trading in Nasdaq-listed shares at the request of Nasdaq.

BATS Global Markets, a stock exchange operator that itself was hit with a nearly hour-long outage on August 6, said it also disabled trading in some Nasdaq securities.

The U.S. Securities and Exchange Commission said it was monitoring developments and in touch with the exchanges.

"I would not want to speculate other than to say this is huge. Everything is halted in the market," said Sal Arnuk, co-manager of trading at Themis Trading in Chatham, New Jersey,

Thursday's outage was the latest of a flurry of high-profile glitches that have become familiar to participants in U.S. stock markets.

On Tuesday, a technical problem at Goldman Sachs Group Inc resulted in a flood of erroneous orders being sent to U.S. equity options markets.

Also hurting market confidence were problems last year related to Facebook's initial public offering, and a disastrous trading blowup at Knight Capital Group Inc that was a contributing factor to the eventual sale of that company.

In 2010, a "flash crash" wiped several hundred points from the Dow Jones industrial average in a matter of minutes.

Other trading venues, such as so-called "dark pools," which execute orders anonymously, were also affected by Thursday's outage.

"We have halted trading of the affected securities in our dark pool," said Mark Turner, managing director and head of sales trading at Instinet in New York. "I believe at this point most dark pools have probably done the same thing."

(Additional reporting by Herbert Lash, Samuel Forgione and Ryan Vlastelica in New York and Sarah N. Lynch in Washington, D.C. and Hezron Selvi in Bangalore; Writing by Dan Burns and Jonathan Stempel; Editing by Nick Zieminski, Andre Grenon, Kenneth Barry and Dan Grebler)