NYSE, Nasdaq Planning Pact to Back up Each Other's Closing Auctions

The New York Stock Exchange and Nasdaq OMX Group Inc. are planning an agreement to back up each other's closing auctions in the event of an outage similar to the nearly four-hour trading halt at NYSE earlier this month.

The closing auction is the most important part of the day for mutual funds and many institutional investors because it sets important benchmark prices for stocks and is a good time to pull off big orders without having a huge effect on the prices of shares.

The two exchanges, usually fierce rivals, are expected to announce as early as Friday that they will each file a rule with the Securities and Exchange Commission for the back-up plans, according to people familiar with the plans.

A technical glitch at NYSE, which is owned by Atlanta-based Intercontinental Exchange Inc., on July 8 led exchange executives to halt trading from 11:32 a.m. to 3:10 p.m. The problem originated in a software update NYSE engineers installed to part of the machine that matches buy and sell orders at the exchange.

Trading in NYSE-listed stocks was able to continue uninterrupted at other exchanges, but there were fears at the time that NYSE wouldn't be able to hold its closing auction that afternoon. The outage also stirred up fears about the fragility of the plumbing that underpins financial markets. Even President Barack Obama was briefed on the outage, according to the White House press secretary.

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