Yet another interruption to trading at a major US exchange Monday
has added more impetus to regulators to review market structure rules and
assess the viability of continuing self-regulation of bourses.
A technical problem with a server was blamed for the halting
of trading in 216 companies on the New York Stock Exchange (NYSE) for most of
Monday. At 9.38am local time the exchange alerted traders it was having
problems with one of its cash equity matching engines and it said it would not
publish quotes on the stocks in question.
In August a glitch almost wiped out market maker Knight Capital and in October, broker error was blamed for a
surge in Kraft’s share price. In May, the launch of
Facebook’s IPO on US exchange Nasdaq OMX was delayed because of a technology fault, and in March, BATS suffered a software problem which affected its own IPO on its own BZX platform.
Each successive failure has brought into sharp focus the
current self-regulatory organisation (SRO) regime under which American bourses
operate, and the Securities and Exchange Commission (SEC) has increasingly
moved to reopen debate on the viability of self regulation.
On October 2, the SEC held a round table to discuss the
relationship between the operational stability and integrity of the securities
markets and the ways that market participants design, implement and manage
complex and interconnected trading technologies.
“Reliance on technology has enabled the markets to achieve
extraordinary levels of speed and efficiency. But with technology comes a
responsibility for getting it right, minimising errors and protecting the
interests of investors,” SEC chairman Mary Schapiro warned at the time of
Schapiro has also asked staff to accelerate a proposal
requiring exchanges and market centres to have specific procedures in place to
ensure the stability of their systems, although no timetable has been
During Monday’s NYSE outage, which affected the Big Board, trading
was still available on alternative venues brokers to route orders through other
exchanges, BATS, Nasdaq, Direct Edge and also NYSE’s own Arca electronic
NYSE is in the process of moving all of its US and European
markets to a universal electronic trading platform, and the company said the
server issues which triggered the problem came as the names were being moved
over to the new platform.