The system for exchanges shut down at the New York Stock Exchange (NYSE) on Wednesday for few hours. Trading during that period took place via the electronic Alternative Trading System, and fortunately the investors did not face any losses.
Apparently, this was one of the worst system glitches since the NASDAQ blackout, according to the CEO of the market-research firm Nanex. This incident was a result of a software update or upgrade that interrupted with the Securities Information Processor, the program that decides the price of stocks, of each exchange. This is similar to what happened with NASDAQ in 2013, and as a result both had to shut down their trades for hours.
NYSE faced difficulties with the gateway, and they decided to halt the system, instead of turning to emergency mode, to identify the root of it. They shut it down when customers identified the discrepancies in the exchanges.
A confused technician at United Continental forced several flights to ground early on Wednesday due to some technical difficulties. However, the government officials later announced that there was no evidence that the two technical difficulties had any links, or the various shutdowns were due to hacking or sabotage.
NYSE President Tom Farley feels that they did not have enough faith in their system, as much as they should have. He said that he made the decision to shut down the system as those New York Stock Exchange listed stocks continued to trade elsewhere during the day.
Similar incidents include; Knight Capital’s $450 million trading glitch in 2012 and Goldman Sachs’ options trading issue in August 2013. Software expert Lev Lesokhin of CAST explained that most IT applications have dead code. It is simply present in the code base but, none of the live modules are calling it. If there is no structural oversight then you do not know if your new live code could be calling the dead code. And, there is no idea of what will happen after.
The ones who encourage a more human involved system in the stock have based their argument on these incidents and suggested that algorithmic trading is dangerous no matter how cautious you are and how you program it. Opponents say that exchanges just need to be more careful and make vigorous software so that it can fight these glitches and continue operations.
While stocks continued to trade elsewhere, and was fairly stable; there have been concerns about China’s falling stock market. Also, a logjam in talks between Greece and its creditors affected the investors’ mood all week. That compares with a drop of 1.1 percent for Standard and Poor’s 500 index.
