(Bloomberg) -- The largest dedicated overnight trading venue in the US was forced to halt stock trading after getting caught up in global market volatility.
Blue Ocean Technologies LLC’s platform was experiencing some technical issues Sunday night and decided to suspend trading, according to a spokesperson. After assessing the situation and discussing with clients, the firm is resuming trading in a limited number of exchange-traded products, including the SPDR S&P 500 ETF Trust, that person said.
“All Blue Ocean staff will be monitoring operations carefully this evening and we will continue to be in communication with subscribers,” the firm said in a statement late Tuesday.
The incident highlights the fragility of overnight trading that has gained traction since the pandemic as a way to allow investors to react to market moving events whenever they occur. The system faced a stress test as global stocks tumbled in the kickoff to trading in Asia Monday — Sunday night in the US — with Japan’s Nikkei 225 index plunging the most since 1987 amid growth fears.
The spike in volume and volatility was too much for Blue Ocean to handle. Its decision to halt transactions led to suspensions at Robinhood Markets Inc. and other brokerages that rely on the firm for overnight trading.
Monday’s selloff exerted stress during regular trading, too. Retail brokerages Charles Schwab Corp. and Fidelity Investments reported outages though both said their issues were resolved by the early afternoon.
Blue Ocean, launched in 2021, is at the forefront of a new Wall Street movement to make stock trading a 24-hour endeavor. By offering overnight trading from 8 p.m. to 4 a.m in New York Sunday to Thursday, it has effectively eliminated the traditional eight-hour overnight break — and appeals particularly to retail and international investors.
At roughly 1:45 a.m. Monday, Blue Ocean detected trading issues and later canceled all trades from that point on to 3:06 a.m. A decision was then made to halt all transactions until the problem was fully resolved.
Interactive Brokers Group Inc. was partially affected by the incident but there were no disruptions in their overnight trading, according to Steve Sanders, executive vice president of marketing and product development. When Blue Ocean went down, the firm started routing all client orders to its own alternative trading venue where buyers and sellers were matched. Roughly 17,000 trades were executed from midnight until 6 a.m. New York time on its own platform.
“There was a huge spike in the volumes on Monday morning,” Sanders said. “They probably failed because they are not used to that type of volume.”
Blue Ocean has been migrating to a new technology trading system run by the MEMX LLC, an independently owned stock exchange. The system, aimed to meet the challenge of higher volume and volatility, will be live by the end of August, the spokesperson said.
--With assistance from Sam Potter.
(Updates with partial trading resumption in second and third paragraphs.)
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