NYSE and Nasdaq bolster safeguards for critical closing auctions

[NEW YORK] The New York Stock Exchange and Nasdaq Stock Market agreed to back each other up during malfunctions that hinder their daily closing auctions, enhancing safeguards for a critical part of the US$25 trillion US stock market.

If either company can't establish closing prices for the stocks they list, the other will calculate that information, according to a statement fro the exchanges Wednesday. The plan needs Securities and Exchange Commission approval.

The world's biggest investors tap into these auctions to do much of their trading, so a breakdown can have wide-reaching implications.

NYSE's closing auction came under scrutiny on July 8, when an outage at the exchange raised the possibility that day's closing auction would be imperiled. Two days later, a Bloomberg News article highlighted the risk from there not being a backup plan in place.

"The role the closing auction plays in establishing reliable closing prices and facilitating liquidity is recognised by market participants and regulators alike," Tom Farley, NYSE Group's president, said in the statement. "We look forward to working with the industry and the SEC to implement this resiliency plan for the public markets on behalf of investors."

Tom Wittman, president and chief executive officer of Nasdaq Stock Market, said, "We welcome the opportunity to work with the NYSE to continually strengthen the quality of our US equity markets."

BLOOMBER