‘Flash Freeze’ Halts Trading in QQQ and Nasdaq ETFs

ETF Trends

Thursday’s “Flash Freeze” flat-lined popular Nasdaq stocks for hours along with one of the market’s most heavily traded exchange traded funds and other ETFs with primary listings on the Nasdaq.

The Nasadaq-100 ETF, PowerShares QQQ (Nasdaq GIDS: QQQ) , was still up 1% Thursday after the Nasdaq exchange paused trading for three hours. QQQ is one of the most active ETFs by trading volume.

The trading disruption affected thousands of Nasdaq-listed stocks, including Google (GOOG), Apple (NadaqGS:AAPL) and Microsoft (MSFT).

“It’s really shocking. We’re stuck,” Ramon Verastegui, head of global engineering and strategy at Société Générale, said in a Wall Street Journal report. “If we want to trade Apple, we can’t.”

The halt impacted buying and selling in dozens of Nasdaq-listed ETFs, including iShares Nasdaq Biotechnology ETF (Nasdaq GIDS IBB) and iShares S&P India Nifty Fifty ETF (Nasdaq GIDS: INDY) , among others, ETF Guide reports.

“We’re pulling out our orders to wait until the system works itself out,” Rick Fier, director of equity trading at Conifer Securities, said in the WSJ article. “The best thing clients can do is take a break.”

It’s never a good time for major trading outages. However, the Nasdaq was lucky enough to dodge a bullet with the technology glitch occurring during a lazy summer trading day with no big economic and market news.

Still, Thursday’s problem was another black eye for Nasdaq. The Facebook (FB) initial public offering last year was marred by system problems.

Naasdaq OMX Group (NDAQ) shares slipped 3.4% Thursday.

QQQ, the Nasdaq-100 ETF, rose late Thursday after flat-lining for three hours, as the chart below shows.

The Nasdaq halt of individual stocks did seem affect ETFs with primary listings at other exchanges such as NYSE Arca.

For example, some tech ETFs such as Technology Select Sector SPDR (XLK) have large weightings in Apple, which is listed on the Nasdaq, notes Chris Hempstead, director of ETF execution services at WallachBeth Capital.

“With AAPL as a heavy weight, market makers were less willing to make tight markets. This was the only kind of dislocation we observed,” he said in a note after Thursday’s closing bell. “We did not see volume extremes and we did not see price dislocation. This was a classic ‘watch, breathe, wait some more and re enter the markets when they normalize’ event. There is no need to trade on wide and ununcertain markets unless you have to.”

View photo

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qqq-5-day-chart

QQQ chart source: Yahoo Finance.

For more information on the Nasdaq, visit our Nasdaq category.

Max Chen contributed to this article.

Full disclosure: Tom Lydon’s clients own QQQ, AAPL, GOOG and MSFT.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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