After a technical glitch that caused the New York Stock Exchange to halt this week, investors are speaking out with concerns about the state of the world financial markets.
The NYSE exchange froze from 11:32am to 3:10pm EDT which is its longest technology failure to date and meant that orders and trades either crashed or were redirected to other exchanges within the network, according to The Washington Post. The glitch has been the latest in a series since the 2010 flash crash, when the technicalities behind how exchanges operated were beginning to be questioned. Alongside this, after the three hour Nasdaq collapse in 2013, Mary Jo White, Securities and Exchange Commission (SEC) chief, ordered exchange senior heads to improve Wall Street systems.
Market analysts believe that the SEC has struggled to come to terms with newer technologies and do not understand why this form of system is becoming popular for modern trading. James Angel, an associate professor of finance at Georgetown University, says that the SEC have taken the wrong approach to market integrity. “The agency has said all the exchange have to have policies and procedures in place to make sure their systems don’t fail. The real issue is: When they fail, what happens,” Angel said as quoted in The Washington Post.
When failures like this occur, it is evident that there is a lack of transparency and the dangers of using technology in finance are hidden. SEC chairman from 2001 to 2003, Harvey Pitt, said that this “kind of stuff is inevitable, but if it’s inevitable, that means you can plan for it.” Pitt continues: “it raises a lot of questions, none of which New York at this juncture has taken any steps to respond to. What confidence are we going to have that this isn’t going to happen anymore, or that what did happen was handled as good as anyone could have expected?”
After the 2010 flash crash, SEC officials took nearly four months to consolidate the events and produce a report on what happened. Since then, the commission has spent millions of dollars on technology in order to create real time systems and adopt rules so that market leaders could handle heavy traffic and security threats.
However, Joe Saluzzi, a partner at brokerage firm Themis Trading, says that there should be resolutions in place if problems occur. “There will never be a 100% bug-free software program. But they should be able to flip a switch, go to a redundant system and keep going. That’s what regulators ought to have looked at. Why isn’t there a backup up and running?” Saluzzi said.
Federal regulators and market leaders have also been encouraged to reform the systems for buying and selling stocks.
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