NEW YORK – In a story July 8 about an outage at the New York Stock Exchange, The Associated Press reported erroneously that United Continental is the biggest U.S. airline. United Continental is the second biggest behind American Airlines.
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A corrected version of the story is below:
How stocks kept trading during the NYSE outage
NYSE outage raises questions about technology
By BERNARD CONDON
AP Business Writer
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NEW YORK (AP) — As if a plunging Chinese stock market and the Greek debt crisis weren't enough, investors on Wednesday got hit with more bad news: a shutdown in trading at one the world's most famous exchanges.
The New York Stock Exchange halted buying and selling of stocks for about 3 ½ hours due to what it called a "technical issue," adding to jitters among traders already on edge and raising questions about the reliability of computerized trading systems.
The halt came after a technical snafu at United Continental that forced the nation's second-biggest airline to ground dozens of flights. And it was followed by temporary trouble accessing the Wall Street Journal's website, and a flood of conspiracy theories on social media about a coordinated hack attack.
Government officials said it did not appear that the technical troubles were related, or that the various shutdowns were due to hacking or sabotage. And stock trading resumed on the NYSE late in the afternoon.
Here is a look at what happened at the exchange, why it could have been worse and the possible fallout in the long run:
Q: WHAT WENT WRONG?
A: The NYSE stopped trading at 11:32 a.m. because of a technical problem that it has yet to provide much detail on. The exchange did say, however, its trouble was not due to a cyber breach.
Stocks continued to trade elsewhere, and without any dramatic moves up or down. The NYSE opened again at 3:10 p.m., and stocks continued to fall, but in an orderly fashion.
Investors had been selling before the halt on worries over steep drops in China stocks and the possibility that Greece won't be able to strike a deal with its creditors.
The Standard and Poor's 500 index ended the day down 1.7 percent.
Q: HOW CAN STOCKS TRADE WITH THE EXCHANGE DOWN?
A: When trading halted at NYSE, buying and selling quickly moved onto rival exchanges.
That wouldn't have been possible years ago when the Corinthian-columned New York Stock Exchange, a symbol of American capitalism, dominated stock trading. But the NYSE now competes with some 60 trading venues to attract buy and sell orders from brokers.
The competition is fierce, and the NYSE is suffering. The NYSE accounted for less than a quarter of U.S. stock trading in the past month, according to data from BATS Global Markets, one of its rivals.
"It's a glitch. It's an inconvenience," Tom Caldwell, chairman of Toronto-based Caldwell Securities, said of the NYSE shutdown, "But the slack is picked up right away."
Q: HAVEN'T SIMILAR TROUBLES HIT THE MARKET BEFORE?
A: If all this sounds familiar, you're not mistaken. Trading exchanges have long struggled with technical troubles.
Most famously, the so-called flash crash sent the Dow Jones industrial average plunging 600 points in five minutes. Regulators later blamed the May 2010 plunge on a computerized selling program.
In March 2012, BATS, the rival exchange, canceled an initial public offering of its own stock after several technical snafus on its exchange. Two months later, a highly anticipated IPO of Facebook on the Nasdaq exchange was marred by a series of technical problems.
Then, in April 2013, trading in options in Chicago was halted due to an outage caused by software problems.
Caldwell, the Toronto investor, said the outages have to be put in perspective.
"The shutdowns are not very frequent given the gazillion of dollars that trade every day."
Q: WHAT'S THE FALLOUT FOR THE EXCHANGE?
A: The near-term impact will be limited, said Larry Tabb, founder and CEO of the Tabb Group, a financial research firm that focuses on markets and trading. However, in the long run, the snafu could make it more difficult for exchanges to argue against greater oversight from regulators.
The Securities and Exchange Commission voted last November to require routine testing of exchanges' trading systems. The exchanges also will be required to notify the SEC about problems, including any systems that are compromised by hacking.
Tabb said exchanges are not happy about the new rule, but that Wednesday's outage is "not going to help them in terms of fighting, or pushing back."
AP Business Writer Steve Rothwell contributed to this story from New York. AP Writers Marcy Gordon and Jim Kuhnhenn contributed from Washington.