For three hours on August 22, 2013, trading was halted on the Nasdaq Stock Market. Trading on the exchange stopped at 12:14 pm and resumed at 3:25 pm, with 35 minutes left of trading for the day. One week after the trading halt NASDAQ OMX credited the freeze to an overloading of the Securities Information Processor (SIP) caused by reconnection issues with the New York Stock Exchange Arca. The freeze received substantial media coverage and generated discussions on the security of increasingly technologically advanced stock exchanges. The event coined the term "flash freeze" following the earlier "flash crash" on May 6, 2010.

Throughout the freeze the Nasdaq composite remained at 3631.17. Following the reopening of the market it rose, closing at 3,638.71, 1.1% higher. Shares of the Nasdaq exchange closed 3.42% down following the freeze.

At 10:53 am New York Stock Exchange (NYSE) Arca could not connect to the SIP after multiple attempts. Subsequently, Nasdaq declared ‘self help’ for Arca. This was revoked at 11:09 am, suggesting that the issue with Arca had been resolved. At 12:14 pm a technical issue impacted price quote distribution. This refers to be ability of the exchange to accurately provide prices of securities that are being traded. At 12:20 pm, all trading was halted on the Nasdaq exchange. There was a subsequent trading halt placed on ‘Tape C’ stocks - Nasdaq listed stocks which may be traded on other exchanges, as quotes could not be provided for those securities. Unlike some purposeful trading halts, options trading did not continue during the flash freeze. In a statement, Nasdaq claimed that the initial cause of the outage was identified and resolved within 30 minutes and that the additional outage time was to ensure that there would be a stable reopening of the market. Test trades began at 2:45 pm and trading officially resumed at 3:25 pm. It was later reported that trades in ‘dark pools’ on Nasdaq listed securities continued in a limited manner past 12:14 pm when trading was halted, until approximately 1:15 pm.

Multiple "dark pool" trading platforms were also shut down during the freeze, and some did not reopen until the follow day, such as Sigma X, a dark pool operated by Goldman Sachs Group Inc. Dark pools operated by other prominent banks and trading firms such as Wells Fargo and Citadel LLC were also non operational for periods of the freeze. These dark pools are not the jurisdiction of the Nasdaq or the NYSE but are reliant on accurate quotes being issued on stocks listed on either exchange and therefore cannot operate when Nasdaq stocks cannot be traded.

Prior to a public statement made by Nasdaq OMX released on the evening of August 22, there was speculation in financial markets as to the cause of the outage. Some media outlets suggested that the outage was caused by a coding error, while others speculated that hacking could have been the cause.

The cause of the outage was identified as being a capacity issue with the Nasdaq SIP. A capacity assessment had been run on the SIP in January 2013 which found that each of the 50 ports in the system could tolerate 10,000 items per second, meaning the whole SIP had a capacity of 500,000 items per second. On August 22, 2013, the NYSE Arca system sent multiple sequences to Nasdaq which consumed a large amount of the system's capacity. The SIP then received quote for inaccurate symbols, the few characters which are used to represent a security on an exchange, from NYSE Arca. This resulted in the SIP generating a numerous quote rejects which further absorbed capacity of the SIP. Every connect and disconnect sequence sent by NYSE Arca to the SIP resulted in over 26000 updates, per port per second. This enormously overwhelmed the Nasdaq SIP and resulted in a system shut down to ensure fairness in the market and prevent further overloading. Nasdaq stated that the volume of activity, per port, per second, at the time of the freeze, was 26 times that of a usual trading day.

On August 22, 2013, NASDAQ OMX released a brief statement citing a connectivity issue between an exchange participant and the SIP as the catalyst for the inability to distribute quotes. The "exchange participant", later named as NYSE Arca was not specified in the initial statement. It was stated that the initial error was identified and resolved within 30 minutes and that the subsequent outage time was spent coordinating with regulators and stakeholders.

On August 29, 2013, NASDAQ OMX issued a statement detailing the causes of the trading halt, as well as admitting a degree of responsibility for the outage. The statement accredited a number of convergent issues as the cause of the outage, some of which NASDAQ OMX took responsibility for. Of these issues they stated that “we are responsible for them, regret them, and intend to take all steps necessary to address them to enhance stability and functionality of the markets.” However, the statement also placed significant blame on the NYSE Arca system as the primary cause for the outage. The statement referred to systemic technological issues and called for collaboration among market leaders to progress the systems. The statement included references to policy changes and design improvements intended to mitigate the potential for further outages, specifically citing disaster recovery, as well as to improve communication with market participants when issues arise.