Tech Problems Trouble Nasdaq

Technical problems — apparently caused by a WorldCom employee — wrought havoc on the Nasdaq Friday.

The problems with two key trading systems forced the Nasdaq to extend its regular trading session by an hour to 5 p.m. EDT and cancel the late trading session it regularly holds.

Telecommunications company WorldCom Inc. said that one of its employees caused the computer glitch.

"We very much regret this market interruption," WorldCom Chief Executive Bernard Ebbers. "For nine years, Nasdaq has been a valued customer. We have resolved this issue and will continue to work with Nasdaq to take all steps necessary to ensure it does not recur."

The problem occurred while testing one of Nasdaq's development systems, WorldCom said. WorldCom operates Nasdaq's networks that share dealers send orders through.

Officials of the computerized stock market hoped to have both systems working by Monday.

"This was unrelated to system capacity" or other problems at the Nasdaq, spokesman Scott Peterson said. "Human beings make mistakes."

It was the second straight day of trading problems for the Nasdaq, but Peterson said the glitches were unrelated.

Although trading continued Friday on alternative networks operated by other service providers, the problems with the SelectNet and Small Order Execution System, or SOES, made it difficult to buy and sell Nasdaq stocks.

SOES, was suspended Friday at 2:31 p.m., EDT, while SelectNet, which handles larger orders, was shut down at 2:30 p.m. because of problems with the Nasdaq's quoting service. Efforts to restart both networks at about 4 p.m. EDT failed.

The problems meant final numbers for the major stock market indexes, including the Dow Jones industrial average, the Nasdaq composite and the Standard & Poor's 500, could not be immediately compiled. Final stock prices were also delayed.

On Thursday, the same systems were shut down after the quote service began malfunctioning. The disruptions were briefer, though, lasting about 20 minutes, and the regular session was not extended. Nasdaq officials do not know what had caused Thursday's problems.

The impact of Friday's difficulties was hard to assess.

At 4 p.m., the Nasdaq was up slightly more than 43 points on the day, to 2,169.31.

Although trading was expected to slow ahead of the July 4 holiday, Friday also marked the end of the second fiscal quarter and the annual rebalancing of the Russell 2000 Index of small capitalization stocks.

The glitches on the Nasdaq could have impeded lastminute window dressing, an end-of-quarter process in which fund managers sell their losers and quickly pick up winners. However it was unclear how much window dressing was left to be done in the last two hours of trading in the quarter's last session.

Still, traders were still busy filling orders. On Instinet, an alternative trading network, volume was 40 percent above of what it is most days, according to spokesman Calvin Mitchell.

"This was a pretty big deal," said Ayakl Tsuboya, a trader at Daiwa Securities. "We don't use SelectNet or SOES, but we still had a hard time. It was hard to tell what was available, the size and price of an order."

According to the Nasdaq Web site, SelectNet is an automated service that enables securities firms to route orders, negotiate terms, and execute trades in Nasdaq securities, eliminating the need for verbal contact between trading desks.

The SOES is an automated execution system for processing orders of up to 1,000 shares.

The Nasdaq's problems were the second set of technical hitches to hit major markets this month.

On June 8, the New York Stock Exchange had to suspend all trading for almost an hour because of problems caused by new software that regulates how small orders are processed on the trading floor.

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