Nasdaq faced a system outage for almost three hours this morning, beginning at 4:55 AM ET (8.55 AM BST). Systems are now operating normally. The issue, the latest in a string of outages in recent months, could see renewed calls for an alternative mechanism to protect market participants.
From 4:55 AM ET, the organisation began to investigate issues with connectivity. A system status message referencing an issue with its matching engine was released at 5:15 AM.
At 5:37 AM ET, the exchange stated that any unacknowledged orders sent using its Rash FIX order handling system engine were not being acknowledged.
After 37 minutes, at 6:14 AM ET Nasdaq stated that it had identified the root cause of the outage and was working to resolve the issues. It added that unacknowledged orders on Rash FIX had been cancelled back to customers.
The organisation reported that it was still working to resolve the issue at 6:50 AM. Normal system operation was restored by 7:14 AM, with the exchange stating that “Nasdaq will provide a full postmortem when available”.
The issue is the latest in a string of market outages at major exchanges, including a suspension of AIM trading at London Stock Exchange in October 2023 and a further outage in December which saw small-cap trading briefly suspended.
READ MORE: LSE outage caused by matching engine logic issue
In June, Six Swiss Exchange also saw a problem with an unmatched order which saw the suspension of both equities and fixed income trading for around three hours. Following the outage, market maker Optiver issued a call to action publishing a plan to protect participants from the impact of technical failures via an alternative pan-European closing mechanism – and calling on listed exchanges to “set aside commercial considerations” for the good of the wider market.
READ MORE: Optiver issues industry-wide call to action to protect the close from market outages
The latest incident is likely to renew calls for an alternative mechanism to cope with market outages. In May, ESMA urged trading venues to ensure they have an “appropriate” market outage plan, including arrangements to avoid an outage affecting the closing auction, and how trading venues should ensure the market is provided with an official closing price.
Last month, analysis by FIA European Principal Traders Association of market data from a day when a partial outage prevent liquidity providers from accessing a major pan-European exchange revealed that their absence materially decreased volumes and increased the cost of trading.
In its post-mortem report, Nasdaq confirmed that at approximately 4:09 ET its matching engine faced an issue that resulted in it becoming unavailable. This caused customers directly connected to the matching engine through OUCH or FLITE connectivity protocols to be disconnected, leaving them unable to send new orders or cancel open orders.
“Customers using Rash and/or FIX received unacknowledged/rejected orders during the issue and were unable to cancel resting orders,” it added. “During the issue, the matching engine was unavailable and no orders were executed.”
Between 26 and 50 customers were affected by the issue, the exchange reported, before the matching engine returned to normal operation as of 7:03 ET.
“During the issue, Nasdaq took steps on Rash/FIX to block new orders from being sent and to cancel any unacknowledged orders,” the exchange said. “Additionally, cancel on disconnect triggered when the matching engine came back up if a port was configured for cash-on-delivery.”
READ MORE: Outage highlighted role of liquidity providers in Europe
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