Nanex Research

Nanex ~ 22-Aug-2013 ~ Let There Be Light - Trading after the Blackout


After the August 22, 2013 blackout which started around 12:04 EDT, exchanges determined the problem and worked to reopen the markets. According to several news sources, the reopening was quite successful. Looking at the data, we agree, the opening was very successful, but only if you were a High Frequency Trader (HFT). For everyone else, the reopening was a disaster with long periods of crossed NBBOs (National Best Bid prices greater than National Best Ask prices) in many large stocks such as Apple, Microsoft, Intel, Facebook and Yahoo.


USA Today:
"All systems are operating normally," Nasdaq said at 3:41 p.m. [15:41] EDT as it announced trading had resumed.
Huffington Post
James Angel, a Georgetown University finance professor who also sits on the board of rival exchange operator Direct Edge, said Nasdaq appeared to take steps to ensure that trading reopen in an orderly fashion and with correct pricing.
Fox News:
Trading had resumed for about an hour on Thursday without incident before the U.S. markets closed.

“We came live quite successfully and finished the day in a normal course of business,” Greifeld [Nasdaq CEO] said.
Wall Street Journal:
The decision to reopen trading with about 35 minutes to go before the close came after exchange officials were sure that banks and brokers had enough time to prepare for securities to trade again, people familiar with the discussions said. Some hiccups persisted after Nasdaq reopened trading, though Nasdaq told traders that the markets closed normally Thursday.

See also Partial Blackout, Partial Blackout Statistics, Amazon's 2.5 Minute Outage and Quote Blast Loops.


Note ARCA is labeled as PACF in the charts below.

1. Charts comparing severely crossed NBBO (red shading) from ARCA (PACF), and trades.
The NBBO is shaded dark gray if normal (bid < ask), yellow if locked (bid = ask) or red if crossed (bid > ask). Crossed quotes are rare and are indicative of significant market structure problems. Reg NMS prohibits crossed quotes. Look for red shading. In the charts with best bids and asks, you'll see that a stale ARCA quote (red triangle) is the cause of the crossed NBBO. Yet trades from ARCA appear unaffected.

        
2. Charts comparing the quote spread in Nasdaq (gray) and ARCA (red).
ARCA quotes did not update properly and caused severely crossed NBBO (where bid price > ask price). Curiously, most of the time, trades from ARCA executed as if ARCA quotes were normal.

        

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