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Nasdaq blames rival NYSE Arca for 3-HOUR trading outage

Claims fellow exchange crapflooded it, but cops to 'latent flaw' in own systems

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The company behind the NASDAQ stock exchange has said that last week's three-hour outage was partly its own fault, but mostly the fault of rival exchange firm NYSE Arca.

The glitch forced Nasdaq to take trading offline on Thursday last week – and thousands of Nasdaq-listed stocks were frozen in place for three hours across the US.

The company released its preliminary findings on the issue, saying that its securities information processor system (SIP) was overwhelmed by information from NYSE Arca, and exchange run by NYSE Euronext.

Nasdaq OMX Group claimed that the firm sent over 20 connect and disconnect sequences to SIP along with a stream of "inaccurate symbols and generated quote rejects". The SIP is set up to handle around 500,000 messages a second across 50 of its ports, or 10,000 per port per second.

But Nasdaq said the NYSE Arca information topped more than 26,000 updates per port per second as it tried to reconnect, compared to a typical 1,000 messages per port per second from the firm.

However, the company also admitted that the failure revealed a problem with SIP's source code.

"This latent flaw prevented the system’s built-in redundancy capabilities from failing over cleanly, and delayed the return of system messages to users," Nasdaq said.

"The combination of large system inputs and delayed outputs ultimately degraded the ability of the SIP system to process quotes to an extent that a shutdown of the system was in the broader public interest, to prevent information asymmetry and ensure fair conditions for all market participants."

The firm said it was working on design changes to strengthen the SIP system.

It's not the first time the exchange has had software issues. When Facebook finally went public in mid-2012 the NASDAQ infamously had a snafu on the first day the free content ad network's stock was listed for trading.

The shares were delayed from going online and then a malfunction sent the systems into a loop that stopped trades being processed at the right time. ®

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