When your postmortem involves the SEC (excerpts below from the very-readable SEC report, http://www.sec.gov/litigation/admin/2013/34-69655.pdf), you’re gonna have a bad day.
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7. […] NASDAQ’s “IPO Cross Application” analyzes all of the buy and sell orders to determine the price at which the largest number of shares will trade and then NASDAQ’s matching engine matches buy and sell orders at that price. (The matching of the buy and sell orders is referred to as the “cross.”) The electronic calculation by the IPO Cross Application usually takes approximately one to two milliseconds to complete.
- NASDAQ’s systems ran a “validation check,” which would confirm that the orders in the IPO Cross Application were identical to those in NASDAQ’s matching engine. One reason that the orders might not match is because NASDAQ allowed orders to be cancelled at any time up until the end of the DOP – including the very brief interval during which the IPO Cross Application was calculating the price and volume of the cross. If any of the orders used to calculate the price and volume of the cross had been cancelled during the IPO Cross Application’s calculation process, the validation check would “fail” and the system would cause the IPO Cross Application to recalculate the price and volume of the cross.
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I’m sure you can already see where this was going to go horribly wrong:
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10. Because the share and volume calculations and validation checks occur in a matter of milliseconds it was usually possible for the system to incorporate multiple cancellations (and intervening orders) and produce a calculation that satisfies the validation check after a few cycles of calculation and validation. However, the design of the system created the risk that if orders continued to be cancelled during each re-calculation, a repeated cycle of validation checks and re-calculations – known as a “loop” – would occur, preventing NASDAQ’s system from: (i) completing the cross; (ii) reporting the price and volume of the executions in the cross (a report known as the “bulk print”); and (iii) commencing normal secondary market trading. This risk was greatest during crosses in which a large volume of orders and cancellations were submitted in rapid succession during the brief period of the cross calculation process.
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http://qz.com/88987/sec-documents-show-how-nasdaqs-computers-bungled-facebooks-ipo/