Nasdaq trading resumes after technical glitch

• Exchange reopens more than three-hour flash freeze shutdown
• No immediate evidence of hacking%3A law enforcement official
• Nasdaq composite had been up when electronic problem struck

Nasdaq reopened trading Thursday afternoon after trading in all Nasdaq-listed stocks and options was halted for more than three hours due to an unknown technical glitch.

The highly unusual flash freeze shutdown did not appear to be caused by a computer hacking incident, according to a federal law enforcement official who did not want to be named because he was not authorized to speak publicly on the matter.

"All systems are operating normally," Nasdaq said at 3:41 p.m. EDT as it announced trading had resumed.

All stock quotes had been cleared before the resumption, according to the exchange, which also said earlier that customers who wished to cancel orders sent prior to the shutdown could do so.

The glitch struck shortly after noon East Coast time. Citing an issue involving electronic quote dissemination, the Nasdaq exchange announced at 12:14 p.m. it was "halting trading in all Tape C securities until further notice."

The exchange announced it had halted options trading at 12:28 p.m. and said firms needing assistance canceling orders should contact market operations.

At the time, the Nasdaq composite was up 31.38 points for the day at 3631.17.

Trading in all stocks listed on the New York Stock Exchange and the NYSEMKT exchange "continue business as usual," spokesman Rich Adamonis said earlier Tuesday afternoon.

"This is a very big problem. It's the flash freeze," says Sal Arnuk, a trader at Themis Trading in New Jersey.

The problems are connected with the Security Information Processor, a system that collects stock prices used by the public, Arnuk says. "This is a very big issue. The markets are broken."

John Nester, a Securities and Exchange Commission spokesman, said "we are monitoring the situation and are in close contact with the exchanges."

There were no immediate signs of problems on other markets, said Michael Farr of Farr Miller & Washington, an investment management firm in Washington, D.C. "You're not seeing a breakdown in bond, gold not going through the roof. Right now the market seems to be taking it very much in stride."

"It's all going to hinge on the cause," said Farr. "If we find out this proes to be hacking or cyberterrorism, then you could see all three markets drop."

Some traders seemed relieved that trading volume has been light, as that could reduce the impact of the outage. But the danger is how the system will react when all the cancelled orders are released when the system comes back up, Arnuk says. "It's almost unpredictable what will happen in the market," he says.

But Thomas Peterffy, head of Interactive Brokers Group, an online discount brokerage, called the trading halt "inexcusable."

"The purpose of multiple exchanges is to have a more robust market system in which if any participant must go out, the system will continue to function," said Peterffy, who added that the shutdown "has a huge cost."

It's the latest black eye for the nation's financial exchanges. Investors are still vexed by the Flash Crash of May 6, 2010 when the value of the Dow Jones industrial average crashed more than 1,000 points over a period of about 15 minutes.

And it's another embarrassment for Nasdaq, which was widely panned for trading problems and delays with the initial public offering of social networking stock Facebook last year.

Contributing: Kevin Johnson