Connectivity issue between Nasdaq and Arca preceded outage: source

A woman holds an umbrella past the Nasdaq MarketSite in New York's Times Square, August 22, 2013.

Credit: Reuters/Lucas Jackson

By Jed Horowitz, Lauren Tara LaCapra and Herbert Lash

NEW YORK | Fri Aug 23, 2013 7:56pm EDT

NEW YORK (Reuters) - The vague "connectivity issue" that Nasdaq said triggered the outage that paralyzed a large part of the U.S. stock market on Thursday originated as a problem between Nasdaq and rival NYSE Arca, a source familiar with the matter said Friday.

Nasdaq said the problem started shortly before midday Thursday and quickly cascaded through its Securities Information Processor, or SIP, the system that receives all traffic on quotes and orders for stocks on the exchange, preventing it from disseminating quotes.

The source, who spoke on condition of anonymity, said brief outages between exchanges occur from time to time but are short-lived.

In such instances, traders receive alerts from an exchange that essentially tell them to rout their order flow elsewhere for a period. Most of these episodes, which may occur several times a week, are resolved quickly.

Nasdaq did not respond to requests for additional information beyond a statement issued to traders on Friday. A spokesman for NYSE Euronext, the parent of the New York Stock Exchange and its NYSE Arca platform, denied Arca was involved.

Nasdaq Chief Executive Robert Greifeld, in television interviews on Friday, declined to identify the source of the connectivity problem.

The precise nature of the breakdown remains unclear.

But the outage, first flagged at 11:48 a.m. EDT (1548 GMT), quickly spiraled out of control and soon left $5.9 trillion of U.S. equities - more than a third of the U.S. stock market - idle for more than three hours. Shares of three of the five largest companies by market value, Apple Inc, Google Inc and Microsoft Corp, typically also among the most active in any session, were unavailable.

COMMUNICATION CRITICIZED

A number of market participants and others criticized Nasdaq's lack of an early public statement on the outage. Nasdaq did not issue a formal press release until late Thursday afternoon, well after the trading day had ended.

"As usual the communication could have been a little bit better. They could improve the communication and the amount of communication," said Mark Turner, managing director and head of sales trading at Instinet in New York.

Nasdaq CEO Greifeld said the exchange sent messages through its trader alert system and was involved in direct communication with clients.

Nasdaq's first responsibility was to assure "fair and orderly markets," Greifeld said on Friday on Fox Business Network, and exchange officials worked first to understand and fix the problem and then to communicate with the securities industry to ensure a smooth restart.

"There was active communication going on," Greifeld said.

"It has shown how horrible the crisis management side is. Communication was horrid. There is no backup. So we have to focus on the crisis management side," Mohamed El-Erian, chief executive and co-chief investment officer of Pimco, said Friday on CNBC.

In the end, even those who criticized Nasdaq for the pace of its communications, agreed the reopening of trading did go well.

Trading on Friday transpired with no apparent hiccups. Shares of Nasdaq itself, which fell 3.4 percent once trading resumed on Thursday, gained about 1.2 percent.

IN THE EYE OF REGULATORS

While worst-case outcomes may have been averted, the outage still was among the most serious in a series of recent technological failures to hit the U.S. securities business, including a software issue at the Chicago Board Options Exchange this spring that delayed the start of trading there for half a day.

It was also the latest black eye for Nasdaq, which in May agreed to pay $10 million, the largest penalty ever against a stock exchange, to settle U.S. Securities and Exchange Commission civil charges over its mishandling of Facebook's initial public offering in 2012.

The incident has already drawn the attention of regulators, and Securities and Exchange Commission Chairwoman Mary Jo White said Thursday she would like to press ahead with new market structure regulations that Nasdaq and other exchanges have resisted.

White's predecessor, Mary Schapiro, said Thursday's events are a harsh reminder of the shaky nature of modern markets.

"Events like this contribute to investors' concerns about the stability and integrity of the marketplace," Schapiro told Reuters in an interview on Friday. "I have said many times while I was SEC chairman ... investors understand they can make or lose money when they buy a stock and the fortunes of the company change. What they don't understand and shouldn't have to understand, and shouldn't be subject to, are losses based on whether the market structure is stable."

Many market participants said it was fortunate the outage occurred during a low-volume summer day.

"We were lucky yesterday," said Sal Arnuk, partner and co-founder of Themis Trading. "If the SIP failure occurred on a 10 billion share day or any high VIX, high volume day in October - where say the Fed changes policy, then I seriously doubt they, or any exchange, would have been able to re-open 2,000-plus stocks. That is a statement to the fact that we have created and allowed and encouraged an overly complex market structure."

(Writing by Dan Burns and Jonathan Stempel; Additional reporting by Rodrigo Campos in New York and Sarah N. Lynch in Washington; Editing by Lisa Shumaker and Dan Grebler)

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U.S. SEC to meet exchange heads September 12 over Nasdaq outage

Construction crew work outside the Nasdaq MarketSite in New York's Times Square, August 23, 2013.

Credit: Reuters/Andrew Kelly

By Douwe Miedema

WASHINGTON | Tue Aug 27, 2013 5:28pm BST

WASHINGTON (Reuters) - The U.S. Securities and Exchange Commission will meet with heads of the major exchanges on September 12 to discuss last week's Nasdaq trading outage, the regulator said on Tuesday.

The meeting with SEC Chairwoman Mary Jo White would address "the market dissemination system involved in last week's halt, as well as other critical market systems and infrastructure issues," the SEC said.

Nasdaq (NDAQ.O) halted trading in the thousands of stocks listed on its platforms last Thursday, including such familiar names such as Apple Inc (AAPL.O), Facebook Inc (FB.O), Google Inc (GOOG.O) and Microsoft (MSFT.O).

It had done so after learning that a system that consolidates stock prices coming in from different trading platforms, known as the Securities Information Processor, was not disseminating price quotations.

The SEC has asked Nasdaq and NYSE Euronext (NYX.N) to come up with a timeline of the three-hour debacle, but the rivals have been unable to agree on the details, Reuters reported on Monday.

The outage is part of a series of high-profile trading glitches. On Monday, exchange operator Deutsche Boerse (DB1Gn.DE) halted trading on its derivatives platform Eurex for an hour after technical problems.

Also last week, a technical problem at Goldman Sachs (GS.N) resulted in a flood of erroneous orders in U.S. equity options markets. And on August 6, BATS Global Markets faced an outage that lasted nearly an hour.

It was also another black eye for Nasdaq, which in May agreed to pay $10 million to settle SEC charges over its mishandling of the flotation of Facebook.

White has pledged to move ahead aggressively with proposed reforms that would hold exchanges, clearing agencies and certain "dark pool" trading venues more accountable for preventing outages and other technical problems.

(Reporting by Douwe Miedema; Editing by Karey Van Hall, Gerald E. McCormick and Leslie Gevirtz)

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Nasdaq Trading Halted Due To Computer Glitch

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2:05pm UK, Friday 23 August 2013 The Nasdaq stock exchange in New York City

By Sky News US Team, in New York

The latest high-tech disruption in the financial markets has increased pressure on Nasdaq and other electronic exchanges to take steps to avoid future breakdowns.

A three-hour trading outage on the Nasdaq stock exchange on Thursday is expected to trigger new rounds of regulatory scrutiny on computer-driven trading, as investors' shaky confidence in the markets takes another hit.

Trading in the Nasdaq, a major stock exchange dominated by the biggest names in technology, suffered the outage after a "technical glitch".

The disruption sent brokers scurrying to figure out what went wrong and raised new questions about the pitfalls of computer-driven stock trading.

Other US exchanges continued trading normally.

Nasdaq CEO Robert Greifeld said that unspecified, external factors caused the glitch, and that the exchange followed all the proper procedures to correct the problem.

Facebook's float on the Nasdaq was hit by glitches

"We all have to be aware of the other person not acting always in the proper way, and you have to have your system be able to handle defensive driving," Mr Greifeld said.

"We're deeply disappointed with what happened yesterday. We aspire to perfection. We want to get to 100% up time."

The Nasdaq freeze echoed earlier stock market problems, such as the sudden plunge in stocks in May 2010 that came to be known as the "flash crash" and the glitch-plagued initial public offering of Facebook last year.

The exchange sent out an alert to traders saying that trading was being halted until further notice because of problems with a quote dissemination system.

Nasdaq said it would not cancel any open orders on Thursday, but that customers could cancel orders if they wanted to.

Securities and Exchange Commission spokesman John Nester said: "We are monitoring the situation and are in close contact with the exchanges."

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Connectivity issue between Nasdaq and Arca preceded outage: source

A woman holds an umbrella past the Nasdaq MarketSite in New York's Times Square, August 22, 2013.

Credit: Reuters/Lucas Jackson

By Jed Horowitz, Lauren Tara LaCapra and Herbert Lash

NEW YORK | Fri Aug 23, 2013 7:56pm EDT

NEW YORK (Reuters) - The vague "connectivity issue" that Nasdaq said triggered the outage that paralyzed a large part of the U.S. stock market on Thursday originated as a problem between Nasdaq and rival NYSE Arca, a source familiar with the matter said Friday.

Nasdaq said the problem started shortly before midday Thursday and quickly cascaded through its Securities Information Processor, or SIP, the system that receives all traffic on quotes and orders for stocks on the exchange, preventing it from disseminating quotes.

The source, who spoke on condition of anonymity, said brief outages between exchanges occur from time to time but are short-lived.

In such instances, traders receive alerts from an exchange that essentially tell them to rout their order flow elsewhere for a period. Most of these episodes, which may occur several times a week, are resolved quickly.

Nasdaq did not respond to requests for additional information beyond a statement issued to traders on Friday. A spokesman for NYSE Euronext, the parent of the New York Stock Exchange and its NYSE Arca platform, denied Arca was involved.

Nasdaq Chief Executive Robert Greifeld, in television interviews on Friday, declined to identify the source of the connectivity problem.

The precise nature of the breakdown remains unclear.

But the outage, first flagged at 11:48 a.m. EDT (1548 GMT), quickly spiraled out of control and soon left $5.9 trillion of U.S. equities - more than a third of the U.S. stock market - idle for more than three hours. Shares of three of the five largest companies by market value, Apple Inc, Google Inc and Microsoft Corp, typically also among the most active in any session, were unavailable.

COMMUNICATION CRITICIZED

A number of market participants and others criticized Nasdaq's lack of an early public statement on the outage. Nasdaq did not issue a formal press release until late Thursday afternoon, well after the trading day had ended.

"As usual the communication could have been a little bit better. They could improve the communication and the amount of communication," said Mark Turner, managing director and head of sales trading at Instinet in New York.

Nasdaq CEO Greifeld said the exchange sent messages through its trader alert system and was involved in direct communication with clients.

Nasdaq's first responsibility was to assure "fair and orderly markets," Greifeld said on Friday on Fox Business Network, and exchange officials worked first to understand and fix the problem and then to communicate with the securities industry to ensure a smooth restart.

"There was active communication going on," Greifeld said.

"It has shown how horrible the crisis management side is. Communication was horrid. There is no backup. So we have to focus on the crisis management side," Mohamed El-Erian, chief executive and co-chief investment officer of Pimco, said Friday on CNBC.

In the end, even those who criticized Nasdaq for the pace of its communications, agreed the reopening of trading did go well.

Trading on Friday transpired with no apparent hiccups. Shares of Nasdaq itself, which fell 3.4 percent once trading resumed on Thursday, gained about 1.2 percent.

IN THE EYE OF REGULATORS

While worst-case outcomes may have been averted, the outage still was among the most serious in a series of recent technological failures to hit the U.S. securities business, including a software issue at the Chicago Board Options Exchange this spring that delayed the start of trading there for half a day.

It was also the latest black eye for Nasdaq, which in May agreed to pay $10 million, the largest penalty ever against a stock exchange, to settle U.S. Securities and Exchange Commission civil charges over its mishandling of Facebook's initial public offering in 2012.

The incident has already drawn the attention of regulators, and Securities and Exchange Commission Chairwoman Mary Jo White said Thursday she would like to press ahead with new market structure regulations that Nasdaq and other exchanges have resisted.

White's predecessor, Mary Schapiro, said Thursday's events are a harsh reminder of the shaky nature of modern markets.

"Events like this contribute to investors' concerns about the stability and integrity of the marketplace," Schapiro told Reuters in an interview on Friday. "I have said many times while I was SEC chairman ... investors understand they can make or lose money when they buy a stock and the fortunes of the company change. What they don't understand and shouldn't have to understand, and shouldn't be subject to, are losses based on whether the market structure is stable."

Many market participants said it was fortunate the outage occurred during a low-volume summer day.

"We were lucky yesterday," said Sal Arnuk, partner and co-founder of Themis Trading. "If the SIP failure occurred on a 10 billion share day or any high VIX, high volume day in October - where say the Fed changes policy, then I seriously doubt they, or any exchange, would have been able to re-open 2,000-plus stocks. That is a statement to the fact that we have created and allowed and encouraged an overly complex market structure."

(Writing by Dan Burns and Jonathan Stempel; Additional reporting by Rodrigo Campos in New York and Sarah N. Lynch in Washington; Editing by Lisa Shumaker and Dan Grebler)

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Connectivity issue between Nasdaq and Arca preceded outage: source

A woman holds an umbrella past the Nasdaq MarketSite in New York's Times Square, August 22, 2013.

Credit: Reuters/Lucas Jackson

By Jed Horowitz, Lauren Tara LaCapra and Herbert Lash

NEW YORK | Fri Aug 23, 2013 7:56pm EDT

NEW YORK (Reuters) - The vague "connectivity issue" that Nasdaq said triggered the outage that paralyzed a large part of the U.S. stock market on Thursday originated as a problem between Nasdaq and rival NYSE Arca, a source familiar with the matter said Friday.

Nasdaq said the problem started shortly before midday Thursday and quickly cascaded through its Securities Information Processor, or SIP, the system that receives all traffic on quotes and orders for stocks on the exchange, preventing it from disseminating quotes.

The source, who spoke on condition of anonymity, said brief outages between exchanges occur from time to time but are short-lived.

In such instances, traders receive alerts from an exchange that essentially tell them to rout their order flow elsewhere for a period. Most of these episodes, which may occur several times a week, are resolved quickly.

Nasdaq did not respond to requests for additional information beyond a statement issued to traders on Friday. A spokesman for NYSE Euronext, the parent of the New York Stock Exchange and its NYSE Arca platform, denied Arca was involved.

Nasdaq Chief Executive Robert Greifeld, in television interviews on Friday, declined to identify the source of the connectivity problem.

The precise nature of the breakdown remains unclear.

But the outage, first flagged at 11:48 a.m. EDT (1548 GMT), quickly spiraled out of control and soon left $5.9 trillion of U.S. equities - more than a third of the U.S. stock market - idle for more than three hours. Shares of three of the five largest companies by market value, Apple Inc, Google Inc and Microsoft Corp, typically also among the most active in any session, were unavailable.

COMMUNICATION CRITICIZED

A number of market participants and others criticized Nasdaq's lack of an early public statement on the outage. Nasdaq did not issue a formal press release until late Thursday afternoon, well after the trading day had ended.

"As usual the communication could have been a little bit better. They could improve the communication and the amount of communication," said Mark Turner, managing director and head of sales trading at Instinet in New York.

Nasdaq CEO Greifeld said the exchange sent messages through its trader alert system and was involved in direct communication with clients.

Nasdaq's first responsibility was to assure "fair and orderly markets," Greifeld said on Friday on Fox Business Network, and exchange officials worked first to understand and fix the problem and then to communicate with the securities industry to ensure a smooth restart.

"There was active communication going on," Greifeld said.

"It has shown how horrible the crisis management side is. Communication was horrid. There is no backup. So we have to focus on the crisis management side," Mohamed El-Erian, chief executive and co-chief investment officer of Pimco, said Friday on CNBC.

In the end, even those who criticized Nasdaq for the pace of its communications, agreed the reopening of trading did go well.

Trading on Friday transpired with no apparent hiccups. Shares of Nasdaq itself, which fell 3.4 percent once trading resumed on Thursday, gained about 1.2 percent.

IN THE EYE OF REGULATORS

While worst-case outcomes may have been averted, the outage still was among the most serious in a series of recent technological failures to hit the U.S. securities business, including a software issue at the Chicago Board Options Exchange this spring that delayed the start of trading there for half a day.

It was also the latest black eye for Nasdaq, which in May agreed to pay $10 million, the largest penalty ever against a stock exchange, to settle U.S. Securities and Exchange Commission civil charges over its mishandling of Facebook's initial public offering in 2012.

The incident has already drawn the attention of regulators, and Securities and Exchange Commission Chairwoman Mary Jo White said Thursday she would like to press ahead with new market structure regulations that Nasdaq and other exchanges have resisted.

White's predecessor, Mary Schapiro, said Thursday's events are a harsh reminder of the shaky nature of modern markets.

"Events like this contribute to investors' concerns about the stability and integrity of the marketplace," Schapiro told Reuters in an interview on Friday. "I have said many times while I was SEC chairman ... investors understand they can make or lose money when they buy a stock and the fortunes of the company change. What they don't understand and shouldn't have to understand, and shouldn't be subject to, are losses based on whether the market structure is stable."

Many market participants said it was fortunate the outage occurred during a low-volume summer day.

"We were lucky yesterday," said Sal Arnuk, partner and co-founder of Themis Trading. "If the SIP failure occurred on a 10 billion share day or any high VIX, high volume day in October - where say the Fed changes policy, then I seriously doubt they, or any exchange, would have been able to re-open 2,000-plus stocks. That is a statement to the fact that we have created and allowed and encouraged an overly complex market structure."

(Writing by Dan Burns and Jonathan Stempel; Additional reporting by Rodrigo Campos in New York and Sarah N. Lynch in Washington; Editing by Lisa Shumaker and Dan Grebler)

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Wall Street ends up a day after Nasdaq outage, Microsoft jumps

1 of 2. Traders work on the floor of the New York Stock Exchange August 21, 2013.

Credit: Reuters/Brendan McDermid

By Rodrigo Campos

NEW YORK | Fri Aug 23, 2013 4:55pm EDT

NEW YORK (Reuters) - Stocks rose in light trading on Friday, led by a jump in Microsoft shares, as trading took place without interruption a day after the Nasdaq stock exchange suffered an unprecedented, three-hour trading halt.

Microsoft (MSFT.O) shares posted their largest daily percentage gain in more than four years after the head of the world's largest software company, Steve Ballmer, announced he will retire within 12 months.

The stock closed up 7.3 percent at $34.77 and was the largest contributor to the advance on the three major indexes.

"The big news today is the succession at Microsoft, but beyond that it's pretty quiet," said Dan Veru, chief investment officer at Palisade Capital Management in Fort Lee, New Jersey.

The Dow Jones industrial average .DJI rose 46.77 points or 0.31 percent, to 15,010.51, the S&P 500 .SPX gained 6.54 points or 0.39 percent, to 1,663.5 and the Nasdaq Composite .IXIC added 19.085 points or 0.52 percent, to 3,657.792.

Volume was among the lowest of the year with about 4.9 billion shares changing hands on the New York Stock Exchange, the Nasdaq and NYSE MKT, far below the daily average so far this year of about 6.3 billion shares.

Trading volume was only slightly higher than Thursday's 4.4 billion, affected by a technological problem that shut down trading in Nasdaq securities for three hours in the afternoon.

On Friday, Robert Greifeld, chief executive officer of Nasdaq OMX (NDAQ.O) said the exchange resolved the technical problems that led to the halt but could not guarantee there would never be future glitches. Nasdaq shares gained 1.2 percent to close at $30.83.

Friday's gains helped the S&P 500 and Nasdaq Composite end a two-week losing streak, but the Dow posted its third consecutive weekly decline. For the week the Dow fell 0.5 percent, the S&P gained 0.5 percent and the Nasdaq added 1.5 percent.

Economic data showed sales of new single-family homes fell by 13.4 percent in July to an annual rate of 394,000 units, well below expectations of 490,000 units.

The data weighed on homebuilder stocks, with PulteGroup (PHM.N) down 1.6 percent to $16.06 and Toll Brothers (TOL.N) off 3.9 percent to $31.19. The PHLX housing sector index .HGX lost 1.6 percent.

Pandora Media Inc (P.N) slumped 12.9 percent to $18.91 after the Internet radio service said late Thursday that rising expenditures to acquire music and expand its sales force would push fiscal 2014 earnings below analyst expectations.

Aeropostale Inc (ARO.N) tumbled 20.2 percent to $8.76 after the teen apparel retailer forecast a steep third-quarter loss.

Shares of Autodesk (ADSK.O) rallied 7.7 percent to $38.91 after earlier hitting $41.72, its highest level since April 2012.

Roughly two issues rose for every one that fell on the NYSE and on Nasdaq 13 rose for every 11 decliners.

(Reporting by Rodrigo Campos, additional reporting by Chuck Mikolajczak; Editing by Kenneth Barry)

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Wall Street ends up a day after Nasdaq outage, Microsoft jumps

1 of 2. Traders work on the floor of the New York Stock Exchange August 21, 2013.

Credit: Reuters/Brendan McDermid

By Rodrigo Campos

NEW YORK | Fri Aug 23, 2013 4:55pm EDT

NEW YORK (Reuters) - Stocks rose in light trading on Friday, led by a jump in Microsoft shares, as trading took place without interruption a day after the Nasdaq stock exchange suffered an unprecedented, three-hour trading halt.

Microsoft (MSFT.O) shares posted their largest daily percentage gain in more than four years after the head of the world's largest software company, Steve Ballmer, announced he will retire within 12 months.

The stock closed up 7.3 percent at $34.77 and was the largest contributor to the advance on the three major indexes.

"The big news today is the succession at Microsoft, but beyond that it's pretty quiet," said Dan Veru, chief investment officer at Palisade Capital Management in Fort Lee, New Jersey.

The Dow Jones industrial average .DJI rose 46.77 points or 0.31 percent, to 15,010.51, the S&P 500 .SPX gained 6.54 points or 0.39 percent, to 1,663.5 and the Nasdaq Composite .IXIC added 19.085 points or 0.52 percent, to 3,657.792.

Volume was among the lowest of the year with about 4.9 billion shares changing hands on the New York Stock Exchange, the Nasdaq and NYSE MKT, far below the daily average so far this year of about 6.3 billion shares.

Trading volume was only slightly higher than Thursday's 4.4 billion, affected by a technological problem that shut down trading in Nasdaq securities for three hours in the afternoon.

On Friday, Robert Greifeld, chief executive officer of Nasdaq OMX (NDAQ.O) said the exchange resolved the technical problems that led to the halt but could not guarantee there would never be future glitches. Nasdaq shares gained 1.2 percent to close at $30.83.

Friday's gains helped the S&P 500 and Nasdaq Composite end a two-week losing streak, but the Dow posted its third consecutive weekly decline. For the week the Dow fell 0.5 percent, the S&P gained 0.5 percent and the Nasdaq added 1.5 percent.

Economic data showed sales of new single-family homes fell by 13.4 percent in July to an annual rate of 394,000 units, well below expectations of 490,000 units.

The data weighed on homebuilder stocks, with PulteGroup (PHM.N) down 1.6 percent to $16.06 and Toll Brothers (TOL.N) off 3.9 percent to $31.19. The PHLX housing sector index .HGX lost 1.6 percent.

Pandora Media Inc (P.N) slumped 12.9 percent to $18.91 after the Internet radio service said late Thursday that rising expenditures to acquire music and expand its sales force would push fiscal 2014 earnings below analyst expectations.

Aeropostale Inc (ARO.N) tumbled 20.2 percent to $8.76 after the teen apparel retailer forecast a steep third-quarter loss.

Shares of Autodesk (ADSK.O) rallied 7.7 percent to $38.91 after earlier hitting $41.72, its highest level since April 2012.

Roughly two issues rose for every one that fell on the NYSE and on Nasdaq 13 rose for every 11 decliners.

(Reporting by Rodrigo Campos, additional reporting by Chuck Mikolajczak; Editing by Kenneth Barry)

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Wall Street ends up a day after Nasdaq outage, Microsoft jumps

1 of 2. Traders work on the floor of the New York Stock Exchange August 21, 2013.

Credit: Reuters/Brendan McDermid

By Rodrigo Campos

NEW YORK | Fri Aug 23, 2013 4:55pm EDT

NEW YORK (Reuters) - Stocks rose in light trading on Friday, led by a jump in Microsoft shares, as trading took place without interruption a day after the Nasdaq stock exchange suffered an unprecedented, three-hour trading halt.

Microsoft (MSFT.O) shares posted their largest daily percentage gain in more than four years after the head of the world's largest software company, Steve Ballmer, announced he will retire within 12 months.

The stock closed up 7.3 percent at $34.77 and was the largest contributor to the advance on the three major indexes.

"The big news today is the succession at Microsoft, but beyond that it's pretty quiet," said Dan Veru, chief investment officer at Palisade Capital Management in Fort Lee, New Jersey.

The Dow Jones industrial average .DJI rose 46.77 points or 0.31 percent, to 15,010.51, the S&P 500 .SPX gained 6.54 points or 0.39 percent, to 1,663.5 and the Nasdaq Composite .IXIC added 19.085 points or 0.52 percent, to 3,657.792.

Volume was among the lowest of the year with about 4.9 billion shares changing hands on the New York Stock Exchange, the Nasdaq and NYSE MKT, far below the daily average so far this year of about 6.3 billion shares.

Trading volume was only slightly higher than Thursday's 4.4 billion, affected by a technological problem that shut down trading in Nasdaq securities for three hours in the afternoon.

On Friday, Robert Greifeld, chief executive officer of Nasdaq OMX (NDAQ.O) said the exchange resolved the technical problems that led to the halt but could not guarantee there would never be future glitches. Nasdaq shares gained 1.2 percent to close at $30.83.

Friday's gains helped the S&P 500 and Nasdaq Composite end a two-week losing streak, but the Dow posted its third consecutive weekly decline. For the week the Dow fell 0.5 percent, the S&P gained 0.5 percent and the Nasdaq added 1.5 percent.

Economic data showed sales of new single-family homes fell by 13.4 percent in July to an annual rate of 394,000 units, well below expectations of 490,000 units.

The data weighed on homebuilder stocks, with PulteGroup (PHM.N) down 1.6 percent to $16.06 and Toll Brothers (TOL.N) off 3.9 percent to $31.19. The PHLX housing sector index .HGX lost 1.6 percent.

Pandora Media Inc (P.N) slumped 12.9 percent to $18.91 after the Internet radio service said late Thursday that rising expenditures to acquire music and expand its sales force would push fiscal 2014 earnings below analyst expectations.

Aeropostale Inc (ARO.N) tumbled 20.2 percent to $8.76 after the teen apparel retailer forecast a steep third-quarter loss.

Shares of Autodesk (ADSK.O) rallied 7.7 percent to $38.91 after earlier hitting $41.72, its highest level since April 2012.

Roughly two issues rose for every one that fell on the NYSE and on Nasdaq 13 rose for every 11 decliners.

(Reporting by Rodrigo Campos, additional reporting by Chuck Mikolajczak; Editing by Kenneth Barry)

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Wall Street ends up a day after Nasdaq outage, Microsoft jumps

1 of 2. Traders work on the floor of the New York Stock Exchange August 21, 2013.

Credit: Reuters/Brendan McDermid

By Rodrigo Campos

NEW YORK | Fri Aug 23, 2013 4:55pm EDT

NEW YORK (Reuters) - Stocks rose in light trading on Friday, led by a jump in Microsoft shares, as trading took place without interruption a day after the Nasdaq stock exchange suffered an unprecedented, three-hour trading halt.

Microsoft (MSFT.O) shares posted their largest daily percentage gain in more than four years after the head of the world's largest software company, Steve Ballmer, announced he will retire within 12 months.

The stock closed up 7.3 percent at $34.77 and was the largest contributor to the advance on the three major indexes.

"The big news today is the succession at Microsoft, but beyond that it's pretty quiet," said Dan Veru, chief investment officer at Palisade Capital Management in Fort Lee, New Jersey.

The Dow Jones industrial average .DJI rose 46.77 points or 0.31 percent, to 15,010.51, the S&P 500 .SPX gained 6.54 points or 0.39 percent, to 1,663.5 and the Nasdaq Composite .IXIC added 19.085 points or 0.52 percent, to 3,657.792.

Volume was among the lowest of the year with about 4.9 billion shares changing hands on the New York Stock Exchange, the Nasdaq and NYSE MKT, far below the daily average so far this year of about 6.3 billion shares.

Trading volume was only slightly higher than Thursday's 4.4 billion, affected by a technological problem that shut down trading in Nasdaq securities for three hours in the afternoon.

On Friday, Robert Greifeld, chief executive officer of Nasdaq OMX (NDAQ.O) said the exchange resolved the technical problems that led to the halt but could not guarantee there would never be future glitches. Nasdaq shares gained 1.2 percent to close at $30.83.

Friday's gains helped the S&P 500 and Nasdaq Composite end a two-week losing streak, but the Dow posted its third consecutive weekly decline. For the week the Dow fell 0.5 percent, the S&P gained 0.5 percent and the Nasdaq added 1.5 percent.

Economic data showed sales of new single-family homes fell by 13.4 percent in July to an annual rate of 394,000 units, well below expectations of 490,000 units.

The data weighed on homebuilder stocks, with PulteGroup (PHM.N) down 1.6 percent to $16.06 and Toll Brothers (TOL.N) off 3.9 percent to $31.19. The PHLX housing sector index .HGX lost 1.6 percent.

Pandora Media Inc (P.N) slumped 12.9 percent to $18.91 after the Internet radio service said late Thursday that rising expenditures to acquire music and expand its sales force would push fiscal 2014 earnings below analyst expectations.

Aeropostale Inc (ARO.N) tumbled 20.2 percent to $8.76 after the teen apparel retailer forecast a steep third-quarter loss.

Shares of Autodesk (ADSK.O) rallied 7.7 percent to $38.91 after earlier hitting $41.72, its highest level since April 2012.

Roughly two issues rose for every one that fell on the NYSE and on Nasdaq 13 rose for every 11 decliners.

(Reporting by Rodrigo Campos, additional reporting by Chuck Mikolajczak; Editing by Kenneth Barry)

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Connectivity issue between Nasdaq and Arca preceded outage: source

A woman holds an umbrella past the Nasdaq MarketSite in New York's Times Square, August 22, 2013.

Credit: Reuters/Lucas Jackson

By Jed Horowitz, Lauren Tara LaCapra and Herbert Lash

NEW YORK | Fri Aug 23, 2013 7:56pm EDT

NEW YORK (Reuters) - The vague "connectivity issue" that Nasdaq said triggered the outage that paralyzed a large part of the U.S. stock market on Thursday originated as a problem between Nasdaq and rival NYSE Arca, a source familiar with the matter said Friday.

Nasdaq said the problem started shortly before midday Thursday and quickly cascaded through its Securities Information Processor, or SIP, the system that receives all traffic on quotes and orders for stocks on the exchange, preventing it from disseminating quotes.

The source, who spoke on condition of anonymity, said brief outages between exchanges occur from time to time but are short-lived.

In such instances, traders receive alerts from an exchange that essentially tell them to rout their order flow elsewhere for a period. Most of these episodes, which may occur several times a week, are resolved quickly.

Nasdaq did not respond to requests for additional information beyond a statement issued to traders on Friday. A spokesman for NYSE Euronext, the parent of the New York Stock Exchange and its NYSE Arca platform, denied Arca was involved.

Nasdaq Chief Executive Robert Greifeld, in television interviews on Friday, declined to identify the source of the connectivity problem.

The precise nature of the breakdown remains unclear.

But the outage, first flagged at 11:48 a.m. EDT (1548 GMT), quickly spiraled out of control and soon left $5.9 trillion of U.S. equities - more than a third of the U.S. stock market - idle for more than three hours. Shares of three of the five largest companies by market value, Apple Inc, Google Inc and Microsoft Corp, typically also among the most active in any session, were unavailable.

COMMUNICATION CRITICIZED

A number of market participants and others criticized Nasdaq's lack of an early public statement on the outage. Nasdaq did not issue a formal press release until late Thursday afternoon, well after the trading day had ended.

"As usual the communication could have been a little bit better. They could improve the communication and the amount of communication," said Mark Turner, managing director and head of sales trading at Instinet in New York.

Nasdaq CEO Greifeld said the exchange sent messages through its trader alert system and was involved in direct communication with clients.

Nasdaq's first responsibility was to assure "fair and orderly markets," Greifeld said on Friday on Fox Business Network, and exchange officials worked first to understand and fix the problem and then to communicate with the securities industry to ensure a smooth restart.

"There was active communication going on," Greifeld said.

"It has shown how horrible the crisis management side is. Communication was horrid. There is no backup. So we have to focus on the crisis management side," Mohamed El-Erian, chief executive and co-chief investment officer of Pimco, said Friday on CNBC.

In the end, even those who criticized Nasdaq for the pace of its communications, agreed the reopening of trading did go well.

Trading on Friday transpired with no apparent hiccups. Shares of Nasdaq itself, which fell 3.4 percent once trading resumed on Thursday, gained about 1.2 percent.

IN THE EYE OF REGULATORS

While worst-case outcomes may have been averted, the outage still was among the most serious in a series of recent technological failures to hit the U.S. securities business, including a software issue at the Chicago Board Options Exchange this spring that delayed the start of trading there for half a day.

It was also the latest black eye for Nasdaq, which in May agreed to pay $10 million, the largest penalty ever against a stock exchange, to settle U.S. Securities and Exchange Commission civil charges over its mishandling of Facebook's initial public offering in 2012.

The incident has already drawn the attention of regulators, and Securities and Exchange Commission Chairwoman Mary Jo White said Thursday she would like to press ahead with new market structure regulations that Nasdaq and other exchanges have resisted.

White's predecessor, Mary Schapiro, said Thursday's events are a harsh reminder of the shaky nature of modern markets.

"Events like this contribute to investors' concerns about the stability and integrity of the marketplace," Schapiro told Reuters in an interview on Friday. "I have said many times while I was SEC chairman ... investors understand they can make or lose money when they buy a stock and the fortunes of the company change. What they don't understand and shouldn't have to understand, and shouldn't be subject to, are losses based on whether the market structure is stable."

Many market participants said it was fortunate the outage occurred during a low-volume summer day.

"We were lucky yesterday," said Sal Arnuk, partner and co-founder of Themis Trading. "If the SIP failure occurred on a 10 billion share day or any high VIX, high volume day in October - where say the Fed changes policy, then I seriously doubt they, or any exchange, would have been able to re-open 2,000-plus stocks. That is a statement to the fact that we have created and allowed and encouraged an overly complex market structure."

(Writing by Dan Burns and Jonathan Stempel; Additional reporting by Rodrigo Campos in New York and Sarah N. Lynch in Washington; Editing by Lisa Shumaker and Dan Grebler)

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Wall Street ends up a day after Nasdaq outage, Microsoft jumps

1 of 2. Traders work on the floor of the New York Stock Exchange August 21, 2013.

Credit: Reuters/Brendan McDermid

By Rodrigo Campos

NEW YORK | Fri Aug 23, 2013 4:55pm EDT

NEW YORK (Reuters) - Stocks rose in light trading on Friday, led by a jump in Microsoft shares, as trading took place without interruption a day after the Nasdaq stock exchange suffered an unprecedented, three-hour trading halt.

Microsoft (MSFT.O) shares posted their largest daily percentage gain in more than four years after the head of the world's largest software company, Steve Ballmer, announced he will retire within 12 months.

The stock closed up 7.3 percent at $34.77 and was the largest contributor to the advance on the three major indexes.

"The big news today is the succession at Microsoft, but beyond that it's pretty quiet," said Dan Veru, chief investment officer at Palisade Capital Management in Fort Lee, New Jersey.

The Dow Jones industrial average .DJI rose 46.77 points or 0.31 percent, to 15,010.51, the S&P 500 .SPX gained 6.54 points or 0.39 percent, to 1,663.5 and the Nasdaq Composite .IXIC added 19.085 points or 0.52 percent, to 3,657.792.

Volume was among the lowest of the year with about 4.9 billion shares changing hands on the New York Stock Exchange, the Nasdaq and NYSE MKT, far below the daily average so far this year of about 6.3 billion shares.

Trading volume was only slightly higher than Thursday's 4.4 billion, affected by a technological problem that shut down trading in Nasdaq securities for three hours in the afternoon.

On Friday, Robert Greifeld, chief executive officer of Nasdaq OMX (NDAQ.O) said the exchange resolved the technical problems that led to the halt but could not guarantee there would never be future glitches. Nasdaq shares gained 1.2 percent to close at $30.83.

Friday's gains helped the S&P 500 and Nasdaq Composite end a two-week losing streak, but the Dow posted its third consecutive weekly decline. For the week the Dow fell 0.5 percent, the S&P gained 0.5 percent and the Nasdaq added 1.5 percent.

Economic data showed sales of new single-family homes fell by 13.4 percent in July to an annual rate of 394,000 units, well below expectations of 490,000 units.

The data weighed on homebuilder stocks, with PulteGroup (PHM.N) down 1.6 percent to $16.06 and Toll Brothers (TOL.N) off 3.9 percent to $31.19. The PHLX housing sector index .HGX lost 1.6 percent.

Pandora Media Inc (P.N) slumped 12.9 percent to $18.91 after the Internet radio service said late Thursday that rising expenditures to acquire music and expand its sales force would push fiscal 2014 earnings below analyst expectations.

Aeropostale Inc (ARO.N) tumbled 20.2 percent to $8.76 after the teen apparel retailer forecast a steep third-quarter loss.

Shares of Autodesk (ADSK.O) rallied 7.7 percent to $38.91 after earlier hitting $41.72, its highest level since April 2012.

Roughly two issues rose for every one that fell on the NYSE and on Nasdaq 13 rose for every 11 decliners.

(Reporting by Rodrigo Campos, additional reporting by Chuck Mikolajczak; Editing by Kenneth Barry)

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Wall Street ends up a day after Nasdaq outage, Microsoft jumps

1 of 2. Traders work on the floor of the New York Stock Exchange August 21, 2013.

Credit: Reuters/Brendan McDermid

By Rodrigo Campos

NEW YORK | Fri Aug 23, 2013 4:55pm EDT

NEW YORK (Reuters) - Stocks rose in light trading on Friday, led by a jump in Microsoft shares, as trading took place without interruption a day after the Nasdaq stock exchange suffered an unprecedented, three-hour trading halt.

Microsoft (MSFT.O) shares posted their largest daily percentage gain in more than four years after the head of the world's largest software company, Steve Ballmer, announced he will retire within 12 months.

The stock closed up 7.3 percent at $34.77 and was the largest contributor to the advance on the three major indexes.

"The big news today is the succession at Microsoft, but beyond that it's pretty quiet," said Dan Veru, chief investment officer at Palisade Capital Management in Fort Lee, New Jersey.

The Dow Jones industrial average .DJI rose 46.77 points or 0.31 percent, to 15,010.51, the S&P 500 .SPX gained 6.54 points or 0.39 percent, to 1,663.5 and the Nasdaq Composite .IXIC added 19.085 points or 0.52 percent, to 3,657.792.

Volume was among the lowest of the year with about 4.9 billion shares changing hands on the New York Stock Exchange, the Nasdaq and NYSE MKT, far below the daily average so far this year of about 6.3 billion shares.

Trading volume was only slightly higher than Thursday's 4.4 billion, affected by a technological problem that shut down trading in Nasdaq securities for three hours in the afternoon.

On Friday, Robert Greifeld, chief executive officer of Nasdaq OMX (NDAQ.O) said the exchange resolved the technical problems that led to the halt but could not guarantee there would never be future glitches. Nasdaq shares gained 1.2 percent to close at $30.83.

Friday's gains helped the S&P 500 and Nasdaq Composite end a two-week losing streak, but the Dow posted its third consecutive weekly decline. For the week the Dow fell 0.5 percent, the S&P gained 0.5 percent and the Nasdaq added 1.5 percent.

Economic data showed sales of new single-family homes fell by 13.4 percent in July to an annual rate of 394,000 units, well below expectations of 490,000 units.

The data weighed on homebuilder stocks, with PulteGroup (PHM.N) down 1.6 percent to $16.06 and Toll Brothers (TOL.N) off 3.9 percent to $31.19. The PHLX housing sector index .HGX lost 1.6 percent.

Pandora Media Inc (P.N) slumped 12.9 percent to $18.91 after the Internet radio service said late Thursday that rising expenditures to acquire music and expand its sales force would push fiscal 2014 earnings below analyst expectations.

Aeropostale Inc (ARO.N) tumbled 20.2 percent to $8.76 after the teen apparel retailer forecast a steep third-quarter loss.

Shares of Autodesk (ADSK.O) rallied 7.7 percent to $38.91 after earlier hitting $41.72, its highest level since April 2012.

Roughly two issues rose for every one that fell on the NYSE and on Nasdaq 13 rose for every 11 decliners.

(Reporting by Rodrigo Campos, additional reporting by Chuck Mikolajczak; Editing by Kenneth Barry)

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Connectivity issue between Nasdaq and Arca preceded outage - source

A cleaner sweeps the sidewalk outside the Nasdaq MarketSite in New York's Times Square, August 23, 2013.

Credit: Reuters/Andrew Kelly

By Jed Horowitz, Lauren Tara LaCapra and Herbert Lash

NEW YORK | Fri Aug 23, 2013 11:41pm BST

NEW YORK (Reuters) - The vague "connectivity issue" that Nasdaq said triggered the outage that paralyzed a large part of the U.S. stock market on Thursday originated as a problem between Nasdaq and rival NYSE Arca, a source familiar with the matter said Friday.

Nasdaq said the problem started shortly before midday Thursday and quickly cascaded through its Securities Information Processor, or SIP, the system that receives all traffic on quotes and orders for stocks on the exchange, preventing it from disseminating quotes.

The source, who spoke on condition of anonymity, said brief outages between exchanges occur from time to time but are short-lived.

In such instances, traders receive alerts from an exchange that essentially tell them to rout their order flow elsewhere for a period. Most of these episodes, which may occur several times a week, are resolved quickly.

Nasdaq did not respond to requests for additional information beyond a statement issued to traders on Friday. A spokesman for NYSE Euronext (NYX.N), the parent of the New York Stock Exchange and its NYSE Arca platform, denied Arca was involved.

Nasdaq Chief Executive Robert Greifeld, in television interviews on Friday, declined to identify the source of the connectivity problem.

The precise nature of the breakdown remains unclear.

But the outage, first flagged at 11:48 a.m. EDT (1548 GMT), quickly spiralled out of control and soon left $5.9 trillion of U.S. equities - more than a third of the U.S. stock market - idle for more than three hours. Shares of three of the five largest companies by market value, Apple Inc (AAPL.O), Google Inc (GOOG.O) and Microsoft Corp (MSFT.O), typically also among the most active in any session, were unavailable.

COMMUNICATION CRITICIZED

A number of market participants and others criticized Nasdaq's lack of an early public statement on the outage. Nasdaq did not issue a formal press release until late Thursday afternoon, well after the trading day had ended.

"As usual the communication could have been a little bit better. They could improve the communication and the amount of communication," said Mark Turner, managing director and head of sales trading at Instinet in New York.

Nasdaq CEO Greifeld said the exchange sent messages through its trader alert system and was involved in direct communication with clients.

Nasdaq's first responsibility was to assure "fair and orderly markets," Greifeld said on Friday on Fox Business Network, and exchange officials worked first to understand and fix the problem and then to communicate with the securities industry to ensure a smooth restart.

"There was active communication going on," Greifeld said.

"It has shown how horrible the crisis management side is. Communication was horrid. There is no backup. So we have to focus on the crisis management side," Mohamed El-Erian, chief executive and co-chief investment officer of Pimco, said Friday on CNBC.

In the end, even those who criticized Nasdaq for the pace of its communications, agreed the reopening of trading did go well.

Trading on Friday transpired with no apparent hiccups. Shares of Nasdaq itself, which fell 3.4 percent once trading resumed on Thursday, gained about 1.2 percent.

IN THE EYE OF REGULATORS

While worst-case outcomes may have been averted, the outage still was among the most serious in a series of recent technological failures to hit the U.S. securities business, including a software issue at the Chicago Board Options Exchange this spring that delayed the start of trading there for half a day.

It was also the latest black eye for Nasdaq, which in May agreed to pay $10 million, the largest penalty ever against a stock exchange, to settle U.S. Securities and Exchange Commission civil charges over its mishandling of Facebook's (FB.O) initial public offering in 2012.

The incident has already drawn the attention of regulators, and Securities and Exchange Commission Chairwoman Mary Jo White said Thursday she would like to press ahead with new market structure regulations that Nasdaq and other exchanges have resisted.

White's predecessor, Mary Schapiro, said Thursday's events are a harsh reminder of the shaky nature of modern markets.

"Events like this contribute to investors' concerns about the stability and integrity of the marketplace," Schapiro told Reuters in an interview on Friday. "I have said many times while I was SEC chairman ... investors understand they can make or lose money when they buy a stock and the fortunes of the company change. What they don't understand and shouldn't have to understand, and shouldn't be subject to, are losses based on whether the market structure is stable."

Many market participants said it was fortunate the outage occurred during a low-volume summer day.

"We were lucky yesterday," said Sal Arnuk, partner and co-founder of Themis Trading. "If the SIP failure occurred on a 10 billion share day or any high VIX, high volume day in October - where say the Fed changes policy, then I seriously doubt they, or any exchange, would have been able to re-open 2,000-plus stocks. That is a statement to the fact that we have created and allowed and encouraged an overly complex market structure."

(Writing by Dan Burns and Jonathan Stempel; Additional reporting by Rodrigo Campos in New York and Sarah N. Lynch in Washington; Editing by Lisa Shumaker and Dan Grebler)

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Nasdaq CEO says resolved Thursday trading halt, sees no liability: CNBC

Robert Greifeld, CEO of the Nasdaq-OMX Stock Market, speaks at the Sandler O'Neill + Partners, L.P. global exchange and brokerage conference in New York June 6, 2013.

Credit: Reuters/Brendan McDermid

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Paralyzed Nasdaq opted for caution over speed in restoring trade

A woman holds an umbrella past the Nasdaq MarketSite in New York's Times Square, August 22, 2013.

Credit: Reuters/Lucas Jackson

By Jed Horowitz, Lauren Tara LaCapra and Herbert Lash

NEW YORK | Fri Aug 23, 2013 9:16am EDT

NEW YORK (Reuters) - Thirty minutes into the crippling outage that hobbled the Nasdaq stock market on Thursday afternoon, stopping all trading in $5.9 trillion worth of U.S. equities, exchange officials had the problem fixed.

Another two and a half hours passed, however, before they were ready to flip the switch and turn the all-electronic market back on.

Most of the 191 minutes that the exchange was dark was spent in sometimes frantic conversation with scores of banks, brokers, investment companies and rival exchanges that wanted the Nasdaq's assurance that a restoration of trading would be orderly and not lead to panic.

Nasdaq's first responsibility was to assure "fair and orderly markets," Nasdaq Chief Executive Robert Greifeld said on Friday on Fox Business Network, and exchange officials worked first to understand and fix the problem and then to communicate with the securities industry to ensure a smooth restart.

"There was active communication going on," Greifeld said.

Meanwhile, banks' trading desks were cautioning Nasdaq, operated by Nasdaq OMX Group Inc (NDAQ.O), not to rush to reopen, fearing that a restart full of technical errors would only sap more confidence from rattled markets, according to three sources at brokerages and banks who declined to be identified.

In the end, the reopening of trading did go relatively well.

Transactions first restarted at 3 p.m. EDT in a single microcap stock, Atlantic American Corp (AAME.O), a test case picked for its front-of-the-alphabet ticker. Twenty-five minutes later, the rest of the market opened, and, according to a Nasdaq statement, "The trading day finished in normal course."

Shares of Nasdaq itself, which initially fell by more than 5 percent when trading resumed, recovered some lost ground to close the day 3.4 percent lower. The widely tracked Nasdaq Composite Index .IXIC gained nearly 1.1 percent.

Ahead of the start of trading on Friday morning, Nasdaq said in a system status message that all of its markets, which include options trading platforms such as BX and Nasdaq Options, were operating normally.

PERSISTENT GLITCHES

While worst case outcomes may have been averted, the outage still is among the most serious in a series of recent technological failures to hit the U.S. securities business, including a software issue at the Chicago Board Options Exchange this spring that delayed the start of trading there for half a day.

It was also the latest black eye for Nasdaq, which in May agreed to pay $10 million, the largest penalty ever against a stock exchange, to settle U.S. Securities and Exchange Commission civil charges over its mishandling of Facebook's (FB.O) initial public offering in 2012.

Late Thursday Nasdaq identified the problem as a "connectivity issue between an exchange participant and the SIP," or Securities Information Processor - essentially the system that receives all traffic on quotes and orders for stocks on the exchange.

This problem "led to degradation in the ability of the SIP to disseminate consolidated quotes and trades," Nasdaq said in a statement. "The cause of the issue has been identified and addressed."

Whether it has been addressed to the satisfaction of regulators is another question. SEC Chair Mary Jo White called for a meeting of Wall Street leaders to help insure the "continuous and orderly" functioning of securities markets.

The incident "should reinforce our collective commitment to addressing technological vulnerabilities of exchanges and other market participants," she said.

Thursday's outage could well give White fodder to press ahead with new rules, proposed in March, that would hold exchanges, clearing agencies and certain "dark pool" trading venues more accountable for taking steps to prevent potential systems disruptions.

The rules, if adopted, would replace the current regulatory model in which exchanges rely on voluntary guidance known as "Automation Review Policies" to address security and stability issues with their systems.

The SEC rushed to roll out its proposal as a direct response to several high-profile software problems last year, including Nasdaq's debacle with the Facebook IPO and a near-collapse at Knight Capital, a major Nasdaq market maker, as well as the two-day shutdown of the U.S. equities market due to Superstorm Sandy.

Exchanges, including the Nasdaq and rival NYSE Euronext (NYX.N), parent of the New York Stock Exchange, pushed back, citing a number of concerns, including costs and an "unduly broad" requirement to disseminate information to member firms about certain incidents. "This requirement would likely have a chilling effect on communications," they wrote.

The SEC agreed to extend the comment period on the rule, effectively delaying it, but late Thursday after this latest incident, White said she will push to get it completed.

AVOIDING THE 'DOOMSDAY SCENARIO'

The problems surfaced at 12:14:03 p.m. EDT, when all traffic through Nasdaq stopped abruptly.

During the shutdown, trading of shares not listed on Nasdaq continued, but transactions could not be executed on the Nasdaq platform. Options trading was also halted. All rival exchanges agreed to halt trading of any Nasdaq-listed issue.

As soon as the outage struck, the Nasdaq's Transaction Services division went into emergency mode, a Nasdaq official said, requesting anonymity.

The team focused primarily on whether the exchange should reopen trading as the clock ticked toward the regular 4 p.m. close. They raised the doomsday scenario of reopening and not being able to execute a flood of orders.

"We asked all the what-if questions," the official said.

As frustrated as Nasdaq customers were by the outage, they were more concerned that the exchange have all its ducks in a row before attempting to restart.

"The general feedback given to Nasdaq was, 'Don't rush back to fix it. It will be 10 times worse to come back online in a rush than to take time and get it right,'" said one source.

At Nasdaq, coordination was tight between the exchange's technology staff, rival exchanges that had halted their trading of Nasdaq stocks, brokerage firm members and the firms' major customers.

"It's not an excuse, but anyone who understands the complexities of the trading and matching systems and the difficulties of having multiple exchanges operating and trading the same stocks can understand how difficult this was," the Nasdaq official said. "It worked. It looks like the customers and the public did not get hurt."

Not all will agree with that assessment, but it could be some time before the size of losses, if any, can be determined. And Nasdaq faces a reputational risk that could damage its listings business.

"If you're advising companies to really go public, are you advising them to go public on Nasdaq?" said one source.

Greifeld defended Nasdaq's technology track record on CNBC Friday morning.

"We aspire for perfection," he said. "We didn't get there yesterday."

(Writing by Dan Burns and Jonathan Stempel; Additional reporting by Rodrigo Campos in New York and Sarah Lynch in Washington; Editing by Lisa Shumaker)

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Nasdaq likes Facebook's surge, but earnings curb Dow, S&P

By Alison Griswold

NEW YORK (Reuters) - The Nasdaq climbed on Thursday, led by a rally in Facebook a day after its earnings, but the broader market's advance was modest after another round of mixed earnings reports.

Facebook Inc shares scored their biggest daily percentage gain ever - soaring 31.6 percent to a session high of $34.88 a day after the online social network company reported a huge jump in mobile advertising revenue. The stock closed at $34.36, up 29.6 percent, and topped the Nasdaq's list of most actively traded names.

Disappointing earnings in the cyclical sector limited the gains in both the Dow and the S&P 500.

Caterpillar Inc was the biggest drag on the Dow, falling 1.6 percent to $82.14. The stock slid for the second day, extending a selloff that began on Wednesday after the world's largest maker of mining and construction equipment cut its 2013 earnings forecast.

General Motors and Dow Chemical reported profits that exceeded expectations, but that was not enough to help the S&P 500 make a big push into positive territory. GM's stock fell 0.2 percent to $37.08, after touching a two-year high of $37.70. Dow Chemical rose 1.8 percent to $34.99.

Still, the market managed to advance slightly, with nine of the 10 S&P 500 industry sector indexes ending the day higher. Material and utility shares were the best performers, after being among the weakest in Wednesday's session.

"The trend in the market is upward unless there's some active piece of bad news. No news is good news, in that sense," said Brian Gendreau, market strategist with Cetera Financial Group in Gainesville, Florida.

"The earnings aren't really surprising anybody. The corporate sector is strong, and the earnings sector is still pretty strong."

Shortly after the bell, Starbucks released its third-quarter results and its stock jumped 6.8 percent in extended-hours trading. Starbucks ended the regular session at $68.17, up 2.3 percent.

Shares of Amazon.com Inc dropped 2.3 percent in extended-hours trading after the world's largest Internet retailer reported second-quarter earnings and gave a cautious forecast for the third quarter. During regular trading, Amazon's stock rose 1.5 percent to close at $303.40.

The Dow Jones Industrial Average <.dji> rose 13.37 points, or 0.09 percent, to end at 15,555.61. The Standard & Poor's 500 Index <.spx> added 4.31 points, or 0.26 percent, to 1,690.25. The Nasdaq Composite Index <.ixic> gained 25.59 points, or 0.71 percent, to close at 3,605.19.

The major U.S. stock indexes have advanced steadily this year. The S&P 500 has climbed 18.5 percent in 2013 after hitting a number of record closing highs along the way. For July, the benchmark index has added 5.2 percent.

With 47 percent of the S&P 500 companies having reported earnings so far, about 68 percent have topped profit forecasts, above the historical average of 63 percent. About 56 percent have reported better-than-expected revenue, a rate that is below the historical average.

TripAdvisor Inc shares vaulted 16.3 percent to $71.10 a day after the company reported a jump in quarterly profit and revenue from its travel website. The stock was the S&P 500's second-biggest percentage gainer.

Natural gas processor Oneok Inc leaped 25.5 percent to $53.77. The stock was the S&P 500's best performer on the day after the company said it would separate its gas distribution business into a standalone publicly traded company called ONE Gas Inc.

On the flip side, homebuilders' shares tumbled and weighed on the S&P 500 after Pulte Group and D.R. Horton reported earnings. Shares of Pulte Group sank 10.3 percent to $16.55, while D.R. Horton's dropped 8.6 percent to $19.38. An index of housing stocks <.hgx> fell 2.5 percent.

In the latest economic snapshot, initial claims for U.S. jobless benefits rose to 343,000 in the latest week from 334,000 in the previous week, the Labor Department said. Economists were looking for a read of 340,000.

New orders for durable goods rose 4.2 percent in June, far stronger than the forecast for a growth rate of 1.3 percent.

About 6.4 billion shares changed hands on U.S. exchanges, on par with the daily average.

Advancers outnumbered decliners on the New York Stock Exchange by a ratio of 17 to 13. On the Nasdaq, about two stocks rose for every one that fell.

(Editing by Jan Paschal)

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