Nasdaq considering 'trader compensation' after software crash

Stock exchange apologises and promises it has rectified problem

Stock exchange Nasdaq is reportedly considering offering traders compensation after a software glitch caused them to make losses on certain trades.

The glitch happened on 25 April and affected trading in over 80 companies during the first half-hour period. According to the Wall Street Journal, Nasdaq's trading algorithms fed incorrect quotes to market makers.

Nasdaq said the problems were caused "solely by a Nasdaq malfunction," which meant the release of "invalid and stale market data" in the first half-hour of trading. Nasdaq's market makers are responsible for providing offers to buy and sell shares of specific companies.

The system fault started at 9.28am and was automatically corrected at 10.02am, but traders were reportedly not given a "regulatory halt message" entitling them to break certain trades until after 2pm.

NASDAQ said on its service status website that the issue "resulted in automated quotes in [that subset of] securities being posted at aberrant prices starting at 09:28:00. In many of these cases these quotes resulted in executions for participants".

It added: "The application that controls these functions was updated and at 10:02:42 the system was normalised. NASDAQ has determined the root cause of the issue and has taken steps to avoid the likelihood of future occurrences."

The problems meant traders were not sure of their financial liability for much of the trading session. Potential compensation for traders as a result of the glitch is still being reportedly discussed by Nasdaq.

Bill Curtis, senior VP at CAST and director of the Consortium for IT Software Quality, said that "given the world's reliance and trust in financial institutions, they need to make eliminating these risks in their critical applications a top corporate priority".

"According to our research, many mission critical applications in the financial industry are riddled with structural defects," he added.

Now read: New York Stock Exchange UK data centre concerns rife following fresh NASDAQ bid

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