Photographer: Scott Eells/Bloomberg
Photographer: Scott Eells/Bloomberg

What happens on Nasdaq doesn't stay on Nasdaq. The fallout from the software malfunction that abruptly halted trading by the electronic exchange for more than three hours today goes far beyond the Nasdaq Stock Market's own 2,446 listed stocks.

Among the many other dominoes to fall were trading in options on Nasdaq stocks. And trading by the dark pools that depend on Nasdaq quotes for their prices. And trading of funds that hold Nasdaq equities.

The outage will skew the calculation of the Nasdaq Composite, a popular metric. It could throw other indexes out of whack, too, including the S&P 500 and the Dow Jones Industrial Average, which are widely used to calculate and compare investment returns.

Because of the interconnectedness of today's markets, other electronic venues, such as Bats Global Markets Inc. in Lenexa, Kansas, and Direct Edge Holdings of Jersey City, New Jersey, stopped trading as well. In truth, it would be difficult to find an unaffected market, which may explain why President Barack Obama got a briefing on the failure by Chief of Staff Denis McDonough.

The vast disruption raises serious questions about the reliability of electronic markets -- and of Nasdaq in particular. Known for its technology listings, including Intel Corp. and Apple Inc., the exchange also fumbled Facebook Inc.'s initial public offering last year. That slip-up resulted in about $500 million in losses for its member firms and a $10 million fine from the Securities and Exchange Commission.

Today's glitch comes just two days after options markets were hit by a large number of Goldman Sachs Group Inc.'s mistaken trades and is the latest in a string of stock-market malfunctions over the last few years. Remember the flash crash of May 2010?

Perhaps Nasdaq should seek advice from the tech companies whose shares it trades? And the SEC should make sure every exchange's computer systems are in good repair before the U.S. markets have a total meltdown?

(Paula Dwyer is a member of the Bloomberg View editorial board. Follow her on Twitter.)