NYSE glitch hurts, but no one felt it

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10 July 2015
Brad Bailey
Shooting yourself in the foot has to be painful. Thankfully, I have not done the fundamental research on this; Let’s just assume that it really hurts! The important thing about shooting yourself in the foot is that the pain is your own. We do not have to look very far to see some very notable examples of self-inflicted pain at companies with their technology. Software and hardware are glitchy and things go wrong. Nothing is better, though, when things go really wrong and no one else is hurt. Other technology failures in the financial markets have hurt many other companies, as well as many individuals. In some of these cases, pain rippled out from some point in a firm’s technology infrastructure and gained strength, as others in the networks were run over by the particular software or hardware failure. That is not really the case with the 3+ hour NYSE halt on Wednesday (July 9, 2015). The NYSE went down, and I am not saying it was not a big deal for NYSE. That’s a lot of nanoseconds to be off-line. However, it was just the loss of one small node in the entire U.S. equity trading network. There was concern at first that it might have been part of a cyber-attack (which is really scary, and who knows, what will be found out as forensic analysis continues but we will leave that to another discussion). A single point of failure in a robust network of dozens of equity trading venues, did very little to change trading. And it was a busy day, with Grexit and Chinapocalyspe in full swing. Plus, the Fed minutes were released while this was all happening! I was busy with a client when Bloomberg News reached out to ask me what was going on at the NYSE, minutes after the halt began. My mind began reeling - was it a cyber-attack? I quickly started thinking about the many experiences I have had with these types of situations: flash crash, failed IPOs, destruction of a firm. I reached out to my network to see what was happening. Yes, NYSE was down, but the other exchanges: (NASDAQ, BATS) were up; the network of darkpools, broker crossing engines, buyside crossing engines were trading. Even NYSE ARCA was up. This is what to I expressed to Pimm Foxx on Bloomberg TV. Something happened, but it was not a disaster, and people could still trade stocks. The robust and competitive web of interconnected venues can be a model for the market structure in other asset classes. The gun went off and wounded one small part of the system, but the fragmented network held.

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