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Nasdaq Acknowledges Computer Overload

The Nasdaq exchange, which has seen trading volume balloon as investors have rushed into technology stocks, experienced computer problems earlier this month, a Nasdaq official said Friday.

Although a March 6 computer glitch was not as severe as one that effectively crippled the exchange and halted trades last November for about 20 minutes, the recent malfunction has reignited concerns among traders and investment managers about whether the nation's hottest exchange can handle an unexpected and unprecedented rise in volume of the computer stocks that are its primary business.

The March 6 incident was ``like a hang nail,'' the Nasdaq official said, compared with the November shutdown, which he characterized as a ``heart attack.''

But traders said it became very difficult to complete trades during the entire 17-minute March incident, from about 2:55 p.m. until 3:12, after a Nasdaq price-feeding system stopped working.

``I stopped receiving prices from Nasdaq, and when you have no prices, there is no trading,'' said one trader at a large Manhattan firm who refused to be quoted.

The problem is volume. The number of transactions on Nasdaq has exploded, from less than 800 million shares per day, on average, during 1998 to 1.7 billion shares daily in January and February of this year. In recent weeks _ as the Nasdaq index level soared to a record 5,000-plus closing and then plunged 9 percent _ trading routinely surpassed 2 bil- lion shares a day.

The exchange, on its Web site, reported another minor system problem Feb. 18 amid a surge in volume.

The Nasdaq official, who spoke on condition that his name not be used, said a software problem on March 6 caused one of the exchange's computer systems to ``get stuck in a loop'' for one minute and 17 seconds.

Although trading was not disrupted, the official said the brief glitch caused an interrupt in the feed of ``last sale prices'' on completed transactions for a total of 17 minutes, as technicians repaired the software problem.

Stock prices could not be fed into the workstations on traders' desks or into the program that calculates the Nasdaq's index level. ``Rather than disseminate bad information, for a while we disseminated no information,'' the official said.

Computers that process trades are separate from those that provide pricing updates in the Nasdaq computer system, which has layer upon layer of backup computers to ensure uninterrupted trading. Nasdaq was ``accepting the trade reports, we were locking in the trade reports,'' he added. ``Everything was functioning.''

But while few investors or traders blame Nasdaq for the volume crunch, it is no secret on Wall Street that Nasdaq has problems keeping up with leaps in trading volume in a bull market for technology stocks that no one had anticipated.

``It's amazing how many trades there are,'' said Michael Ryan, head of equity trading for State Street Resarch & Management, a Boston investment firm. About Nasdaq, he said, ``They're overloaded.''

-- Martin Thompson (, March 18, 2000

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