Nasdaq: Stock Price Error Was a Fluke
WASHINGTON (AP) _ The Nasdaq Stock Market defended its surveillance systems after a trader’s computer error fouled calculation of the final prices for some of the nation’s largest stocks.
The trader’s mistake, which occurred after Friday’s 4 p.m. regular trading session, led to the transmission of incorrect last-sale prices for the shares of 28 major companies, ranging from General Motors Corp. to Walt Disney Co.
The error couldn’t be corrected in time for a 5:15 p.m. deadline to transmit the stock information to a central industry computer system. That system, known as SIAC or Securities Industry Automation Corp., in turn serves vendors such as The Associated Press that provide stock tables to the nation’s newspapers.
Nasdaq executives said Monday its market services staff, based in a computer center in Rockville, Md., typically catches trade reporting errors in time. The staff was working to correct the errors Friday, but they couldn’t fix it before SIAC’s final deadline.
″We have an elaborate system to check the accuracy of these reports,″ said Lynn Nellius, director of market surveillance at the National Association of Securities Dealers, the industry group that runs Nasdaq.
″We have a good track record of finding them,″ Nellius added.
James M. Cangiano, senior vice president of NASD’s market surveillance, said it was unfair to link Friday’s error with technical problems that led to short outages this summer for Nasdaq, the nation’s second largest stock market.
The Securities and Exchange Commission staff has taken an initial view that Friday’s problem was the result of a human error and doesn’t represent a weakness in Nasdaq’s systems, an SEC lawyer who specializes in Nasdaq said on condition of anonymity.
The SEC staff wasn’t aware of a similar case and hasn’t received complaints or reports of errors, the attorney added.
″None of this would have happened if the member would have inputted trades the way he was supposed to,″ Cangiano said.
The president and chief executive of SIAC, the industry group that tabulates and distributes consolidated stock trading data, wouldn’t say if Nasdaq is any worse or better than other exchanges in fixing errors.
″Overall, I think the integrity of the data is very high,″ SIAC chief Charles McQuade said. ″So what goes out at the end of the day is quite reliable.″
Cangiano would not identify the trader or the firm involved, but said reporting violations can result in disciplinary sanctions and fines.
Cangiano said considering the size of Nasdaq’s daily trading volume, which averages about 300 million shares daily, the problems are minute.
″What you’ve got to remember is you’ve a lot of hands pressing a lot of buttons and somebody could hit the wrong key or input it incorrectly,″ Cangiano said.