KELLY MCEVERS, HOST:
The New York Stock Exchange suspended trading for more than three and a half hours today, thanks to what was called a technical problem. Trades were routed to the many different electronic exchanges that now operate, so the business of buying and selling stocks went on. But the episode is a big embarrassment for the New York Stock Exchange, which, over the years, has seen a steady decline in its share of trading volume. NPR's Jim Zarroli reports.
JIM ZARROLI, BYLINE: Even before the market opened, the New York Stock Exchange sent out a warning that it was having system issues, says Eric Hunsader of Nanex, which provides financial data to investors. As the morning dragged on, Hunsader says, there were more signs of trouble. The amount of stock trades handled by the New York Stock Exchange - usually about nine percent of the market, total - began to fall.
ERIC HUNSADER: They were slowly dropping to eight percent, seven, six and then around 10:45, five, four, three, two, one, zero.
ZARROLI: Hunsader says the problem appears to have been some sort of technical glitch.
HUNSADER: I think something happened at 10:45. That was the beginning of some problem. It started - showed up and progressively got worse.
ZARROLI: Whatever the cause, the NYSE was able to offload most of its trades to other electronic exchanges. And though there were isolated interruptions, investors, for the most part, were able to continue with their trading. But at the New York Stock Exchange, which in years past has been a hub of frenzied activity, trading ground to a halt at a little after 11:30, and the digital screens above the floor were suddenly blank. Chris (ph) is an options trader who didn't want his last name used because he isn't supposed to talk to the press.
CHRIS: They just to give you a heads-up. Can't trade these products. (Unintelligible) are halted, and that's it. I called all my customers and said, I can still work for you. Just give me your orders, and I'll trade it on another floor.
ZARROLI: The NYSE finally reopened a little after three. The major indexes finished down by less than two percent. The outage was a big black eye for the New York Stock Exchange. In an interview on CNBC, Exchange President Tom Farley tried to make the best of the incident, noting that investors had been spared any real inconvenience.
(SOUNDBITE OF ARCHIVED RECORDING)
TOM FARLEY: We need to make sure that stocks, including NYSE-listed stocks, can continue to be traded. Fortunately, in this instance, they can continue to be traded, although it's not - it's not a good day. I don't feel good for our customers who are having to deal with the fallout.
ZARROLI: Farley said the incident wasn't due to hacking. Instead, it was an internal technical issue. Brad McMillan, chief investment officer at Commonwealth Financial Network, says the stock market has simply become a lot more complex in recent years. There are more players doing a lot of different kinds of trading.
BRAD MCMILLAN: You have more and more market actors trying to act more and more quickly. At some point, there's going to be a glitch, and occasionally, it's going to be bad enough to shut the whole thing down.
ZARROLI: In August 2013, for example, a technical glitch actually shut down trading on the NASDAQ Stock Exchange altogether in what was later blamed on a software bug. For three hours, traders were unable to buy and sell shares of major companies such as Microsoft and Facebook. This time around, McMillan says, the market actually survived pretty well.
MCMILLAN: You can look at this as kind of a live-action stress test of the overall financial system, which has actually done quite well.
ZARROLI: Disaster was averted, but the incident is one more reminder of how complicated the financial markets have become and how much they depend on technology that runs smoothly. Jim Zarroli, NPR News, New York. Transcript provided by NPR, Copyright NPR.
