Trading in about 3,200 Nasdaq-listed stocks, including Apple Inc, Google Inc, and Facebook Inc, ground to a halt last Thursday after an unexplained "connectivity issue" with the system that disseminates last sale prices and stock quotes.
Nasdaq, a unit of Nasdaq OMX Group Inc, began sending alerts to trading desks when trading was halted shortly after noon, though some people in the market question whether the exchange released enough information.
Nasdaq Chief Executive Robert Greifeld said in an interview on Friday with television station CNBC that the exchange was in touch with regulatory officials, other exchanges and the Securities Industry and Financial Markets Association, a trade organization representing brokers and asset managers.
"Greifeld obviously was trying very hard to get this right and to communicate appropriately a difficult situation," said Jim McCaughan, president of global asset management at Principal Financial Group Inc in Des Moines, Iowa.
"But I think he's mistaken to think by talking to the inside circle he's communicating enough."
Millions of people own shares of companies listed on Nasdaq and they were never adequately informed as to why Nasdaq was shut down, said McCaughan, who helps oversee US$290bil (RM870bil) in assets at Principal.
A Nasdaq OMX spokesperson declined to comment, citing the exchange's policy of not discussing details of conversations with customers.
The outage was among the most serious in a series of recent technological failures to hit the US securities business. Last week's trading halt, the May 2010 Flash Crash, Nasdaq's botched handling of Facebook's IPO and trading glitches at Knight Trading last year and at Goldman Sachs last week have rattled public confidence in the market.
"It seems like there is little consistency in how these things are dealt with," said Stephen Massocca, a managing director at brokerage Wedbush Equity Management LLC in San Francisco. "I don't think there is a single methodology for dealing with these things, that quite frankly are going to continue to happen."
Nasdaq faced similar criticism last year when Facebook debuted its share offering. An open conference call held on the morning of that IPO in May 2012 went silent during a critical period, when market-makers wanted to know why trading was not occurring. An explanation was not forthcoming for several hours.
"Those events contribute to the fact that retail investors, to the extent they hear about them, are extremely suspicious" of the market, McCaughan said. "There is also a broader issue that I don't think gets enough coverage, which is the public interest in stock markets."
A set of procedures on how to disseminate information about technical failures must be established, Massocca said.
Nasdaq put Thomas Wittman, a senior vice-president who is in charge of US options at Nasdaq, on separate calls with regulators and exchange officials, brokerages and SIFMA members. Wittman was "extremely helpful," a market source said.
Even though Nasdaq posted updates on its website and held the Sifma call, it was impossible for many brokers to talk directly to the exchange, said an executive at a major U.S. trading firm who spoke on condition of anonymity.
"One of the biggest issues from our perspective was that the amount of information that was coming out made it difficult to really assess when and how they were going to come back up again," the trading firm executive said.
The Sifma call, which the executive said was "OK," indicated the need for a better venue or means to communicate.
"There were a lot of questions that came up that would have been good to have a dialogue about. Also, just so that we could risk manage - if we have trades we have to take down off of the tape, that has risk management implications," the executive said.
"The only thing you would get was just a periodic update on the Web site. We need, as an industry, a better way to communicate during these kinds of situations." - Reuters
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