We don’t know when. We don’t know where. But sometime in the future there will be another technical glitch that stops our capital markets cold. Hopefully, it will be similar to the problem on Thursday when the Nasdaq Stock Market shut down trading for three hours. After it restarted, investors didn’t flee the market en masse. Instead, they showed incredible patience and faith.
The American stock market, of course, is not just one market. It is several markets operated by many players. Some, like the Nasdaq Stock Market or the New York Stock Exchange, are highly regulated exchanges that publish rich streams of trading data. Others are so anonymous and opaque they’re referred to as dark pools. They are loose-knit groups swapping billions of dollars of assets out of sight of regulators.
In the week ahead, scrutiny of Thursday’s Nasdaq operational meltdown will intensify. Calls for studies, blue ribbon panels perhaps even a congressional hearing or two will take place. The Securities and Exchange Commission already has promised an “all hands on deck” meeting, though without setting a date or even a specific timetable. All were similar responses to the Flash Crash of May 2010 and other market breakdowns which serve as reminders to investors about how technologically dependent markets have become.
But it’s not the technology that’s the problem. Computers break down. Software code has glitches. Redundant systems fail. The technology has allowed the markets to move at super-human speed, but the response to the challenges by regulators is merely human.
Tom Hudson is a financial journalist. He hosts The Sunshine Economy on WLRN-FM in Miami. He is the former co-anchor and managing editor of Nightly Business Report on public television. Follow him on Twitter @HudsonsView.