The New York Stock Exchange and Nasdaq OMX Group Inc. are
planning an agreement to back up each other's closing auctions in
the event of an outage similar to the nearly four-hour trading halt
at NYSE earlier this month.
The closing auction is the most important part of the day for
mutual funds and many institutional investors because it sets
important benchmark prices for stocks and is a good time to pull
off big orders without having a huge effect on the prices of
shares.
The two exchanges, usually fierce rivals, are expected to
announce as early as Friday that they will each file a rule with
the Securities and Exchange Commission for the back-up plans,
according to people familiar with the plans.
A technical glitch at NYSE, which is owned by Atlanta-based
Intercontinental Exchange Inc., on July 8 led exchange executives
to halt trading from 11:32 a.m. to 3:10 p.m. The problem originated
in a software update NYSE engineers installed to part of the
machine that matches buy and sell orders at the exchange.
Trading in NYSE-listed stocks was able to continue uninterrupted
at other exchanges, but there were fears at the time that NYSE
wouldn't be able to hold its closing auction that afternoon. The
outage also stirred up fears about the fragility of the plumbing
that underpins financial markets. Even President Barack Obama was
briefed on the outage, according to the White House press
secretary.
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