New York Stock Exchange Flash Crash
“What had once been the world’s most public, most democratic, financial market had become, in spirit, something like a private viewing of a stolen work of art.” – Michael Lewis (author) ‘Flash Boys (2014). p. 69
It really is like a bad sequel – Flash Crash II: Revenge of the Flash Crash. Or Flash Crash goes West. Or Son of Flash Crash.
On July 8, the governors of the New York Stock Exchange halted trading on the NYSE and the NYSE Markets for over 3 ½ hours due to a “technical issue.” This was the most significant drop since the 2013 NASDAQ halt. Although trading continued without interruption on the other exchanges, this incident is another reminder that the technology we depend on is vulnerable.
The governors of the New York Stock Exchange stated that the suspension was not the result of a cyberattack.
Also on July 8, computer problems grounded United Airlines flights for the second time in recent weeks. The Wall Street Journal website also went down.
One is a fluke, two is a coincidence. Three is a pattern.
It’s hard not to expect something more going on when it seems like every day there is a new report of a company or government computer system being hacked.
Even if it was just a technical glitch, it’s another wake up call. Technology is great. Where once traders stood around a buttonwood tree on Wall Street and then on a trading floor, trading now is tech-driven.
Starting with the emergence of NASDAQ, trading just keeps getting faster and easier than ever before. However, new ways of trading also puts us at risk in myriad ways.
This past April, United States authorities arrested a United Kingdom-based trader for an alleged role in the 2010 flash crash when the stock market plunged nearly 1,000 points and then jumped back up again in minutes. Among the trader’s alleged activities was using automated trading software that ensured orders were posted in such a way that they were never executed. Such high-frequency automated trades exacerbated the plunge according to the CFTC and SEC.
When the markets drop for a complex of economic, political and societal human-created reasons — that’s economics. When the markets drop for a complex due to technology related problems or manipulation — that’s crime. It goes against the whole point of a public, mostly democratic, financial market.
We’ll see what the investigation of this latest incident reveals, but it’s surely not the last time we’ll be dealing with the downsides of our supposed technological advances.