Dow Jones Says Data Problems Accelerated Dow's Drop
By Edgar Ortega
Feb. 27 (Bloomberg) -- Dow Jones & Co. said its computers were responsible for the sudden drop in the Dow Jones Industrial Average about an hour before the close of trading today because they failed to keep up with stock trades. The New York Stock Exchange and Nasdaq Stock Market Inc. also reported problems.
The Dow average plummeted 178 points in a single minute just before 3 p.m. New York time. That's when Dow Jones switched to a another data server, which instantly calculated the effect of trades done earlier in the day Dow Jones spokeswoman Sybille Reitz said.
``The extraordinary heavy trading volume caused a delay in our Dow Jones Industrial Average data,'' Reitz said. ``As we identified the problem we switched over to a backup system and the result was a rapid catch up in the public value for the Dow.''
Stocks lurched lower after the sudden drop, driving the Dow average down as much as 546.2 points, or 4.3 percent, and leading the market to its biggest single-day rout since the Sept. 11 terrorist attacks. The malfunction in the oldest, most established benchmark for U.S. stock prices shows how a technical fault can worsen a market decline.
``I don't think it would have been as bad had there not been some technology issues,'' said Kenneth Polcari, a managing director at ICAP Plc's equities unit who has traded at the New York Stock Exchange for more than 25 years ``The technology issues created some anxiety, which exacerbated the market's move.''
NYSE, Nasdaq Delays
The New York Stock Exchange and rival Nasdaq were less specific about the nature of difficulties they incurred.
``Toward the end of the trading today, we experienced intermittent delays and we are assessing the situation,'' NYSE spokesman Eric Ryan said.
Nasdaq sent an alert to traders at 2:56 p.m. reporting slow responses to stock orders sent to the NYSE. Less than an hour later, Nasdaq, which last year combined three trading systems into one, reported delays in distributing some market data, according a notice on its Web site.
``Our systems performed well in the face of the first major volume day for our single-book trading platform,'' Nasdaq spokeswoman Bethany Sherman said.
Rob Harrington, head of cash equities trading at UBS AG in Stamford, Connecticut, said he couldn't understand why prices seemed to be falling so fast.
``My first response was, `Is that an error? Did someone hit the wrong button?''' Harrington said.
The Dow average gained back some ground to close at 12,216.24 points, down 416.02 points or 3.3 percent. The S&P 500 retreated 50.33, or 3.5 percent, to 1399.04. The Nasdaq Composite Index dropped 96.66, or 3.9 percent, to 2407.86. |
