Last week’s three-hour shutdown of the tech-heavy Nasdaq raised fears over cyber attacks, but now the company that owns and operates the stock exchange has admitted partial responsibility.
However, the Nasdaq OMX Group also blamed rival stock exchange operator NYSE Euronext for swamping Nasdaq’s systems with “a stream of inaccurate symbols”, according to the BBC.
Bob Greifeld, Nasdaq OMX CEO admitted that the company’s backup systems failed to handle the data volume due to “a bug in the system”.
The shutdown highlighted how technology failures can impact financial markets, and is the latest of several high-profile glitches to hit US markets that have undermined market confidence.
Analysts believe it will refocus attention on regulatory efforts to strengthen the technology behind major stock exchanges.
US regulators are considering making reviews of backup plans mandatory to ensure they keep up with technological changes and cyber threats.
Nasdaq OMX said it would report to regulators within 30 days on how it intends to fix its faulty “securities information processor” (SIP) to ensure the problem does not arise again.
The stock exchange said that the data traffic generated by NYSE Euronext’s Arca system on 22 August 2013 was double what the SIP’s data ports were able to handle, revealing a flaw in the SIP’s software.
Although the problem was identified and fixed within half an hour, Nasdaq OMX said testing of the system delayed the re-opening of the stock exchange for nearly three hours.
The dependency of stock markets on technology is a long running concern for cyber security experts, who warn that hackers have a keen interest in manipulating stock prices for financial gain.
In June, Andrew Haldane, director of financial stability at the Bank of England, told parliament’s Treasury Select Committee that cyber attacks are the top risk for UK banks.
Concerns over cyber attacks top even those around the eurozone crisis and the UK’s banks must do more to protect themselves, he said.
Just days before the Nasdaq trading freeze, a report by business consultancy KPMG said cyber attack or disruption could cause the next systemic shock to the UK banking industry rather than a liquidity crunch.
While the banking industry has addressed many of the problems that led to the financial crisis in 2008, the KPMG report said cyber attacks or massive systems outages represented new threats.
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