Nasdaq crash was caused by dodgy software -

The shutting down of the Nasdaq exchange due to computer problems was not because of hackers, as many had suspected.

Apparently the three-hour halt in trading arose from shonky software.

The Nasdaq OMX Group released preliminary findings that provided the clearest official insight into what caused the trading halt, being called in trading circles as the "flash freeze".

Stock prices were little affected when the exchange reopened late in the afternoon of 22 August, but there were fears about the fragility of modern markets and their dependence technology.

There were some suggestions that they were potentially vulnerable to hackers.

In this situation, however, the software appears to have gone wrong after the Arca system of NYSE Euronext tried several times to connect with the Nasdaq system.

That generated a surge of data which led to a failure of Nasdaq's backup systems, forcing the market to go offline to fix the problem.

Robert Greifeld, Nasdaq's chief executive was quoted by the New York Times as saying that the code has a nefarious way of working and then not working.

Arca tried to connect more than 20 times to the system and as part of the procedure, it sent over a number of zero-dollar quotes. These are meant to make sure that no stale trades would be sent out to the market.

However, the data sent greatly exceeded the amount that Nasdaq's Securities Information Processor could handle. For some reason the Nasdaq's system was not designed to "throttle" the flood of information so much as break.

When Arca overwhelmed Nasdaq's SIP the system started using back-up servers. Then the administrators found a a flaw in the backup software and it was goodnight Vienna.

Nasdaq fixed the problem within half an hour of turning off the machines but it took additional time to contact other markets and regulators.