World and Nation

Technology hampers opening of exchange

Trading on the nation’s largest options exchange was delayed for several hours on Thursday because of computer problems, the latest incident to highlight the vulnerability of markets to technological shocks.

The Chicago Board Options Exchange, which normally begins trading for most of its products at 9:30 a.m. Eastern time, returned to normal operations by early afternoon. But brokers who typically trade tens of thousands of options each day through the exchange sat on the sidelines for much of the morning.

The exchange trades options are based on the Standard & Poor’s 500-stock index and the VIX index, a popular barometer of investor sentiment about volatility in U.S. stock markets. The contracts are important tools among investors seeking ways to hedge their stock holdings.

The system failure was the second instance this week of technology intruding into the markets. Earlier this week, a message from The Associated Press’ Twitter account falsely reported explosions at the White House, causing the Dow Jones industrial average to plunge nearly 150 points in two minutes. The markets rebounded quickly after the AP said its account had been hacked.

The market debut of Facebook was botched last May, and a blowup at Knight Capital rattled the markets and nearly toppled the firm.

In today’s rapid-speed electronic trading world, where high-frequency traders zip in and out of stocks and futures at speeds that are faster than the blink of an eye, the nation’s exchanges have sometimes struggled to keep up. Probably most famous is the “flash crash” of May 2010 that sent the Dow into a tailspin. It took regulators months to figure out how what caused the index, already down more than 300 points, to suddenly drop like a stone to a 1,000-point loss before recovering much of that within 20 minutes.

The malfunction in Chicago stoked fear again among regulators and reignited concerns about the market’s vulnerability to broader shocks.

“The recurrence of technology glitches in markets means we need not blindly accept that the whiz-bang machinery will always work as well as it should have,” said Bart Chilton, a regulator at the Commodity Futures Trading Commission. “On the contrary, we need to open our eyes to that fact.”

A news release from the exchange said the cause of delay was “an internal systems issue and not the result of any outside influence.” The exchange has told authorities that the problem stemmed from a “bug” in its computer software, said a person briefed on the matter who was not authorized to speak publicly.