NYSE Glitch Shows TradFi Also Flawed

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A New York Stock Exchange glitch yes­ter­day demon­strat­ed that tra­di­tion­al mar­ket sys­tems can still be prone to fail­ure or manipulation.

Accord­ing to the NYSE, a “sys­tem issue” effec­tive­ly negat­ed the open­ing sales for hun­dreds of secu­ri­ties trig­ger­ing wide­spread trad­ing halts. In cre­at­ing con­fu­sion over whether orders were being filled at cor­rect prices, the glitch affect­ed the trades of over 250 secu­ri­ties. These includ­ed the shares of some major cor­po­ra­tions, includ­ing Exxon­Mo­bil, 3M, Ver­i­zon, McDonald’s Corp, Wells Far­go and Walmart. 

One investor explained that the glitch had caused his open­ing orders on the NYSE to auto­can­cel, even though he had intend­ed to ful­fill them. Accord­ing to the stock exchange, the stocks start­ed trad­ing “with­out an open­ing print,” which caused them to reflect incor­rect prices. The exchange said it would declare the false price points as null and void and can­cel the result­ing trades.

NYSE Glitch Fallout 

The exchange was able to sal­vage the remain­der of the day, end­ing with a nor­mal mar­ket close. Although NYSE said it would be inves­ti­gat­ing the inci­dent, the cause of the glitch still remains unclear. How­ev­er, ini­tial esti­mates of how much the glitch will cost investors range into eight figures. 

The U.S. Secu­ri­ties and Exchange Com­mis­sion said it would be inves­ti­gat­ing the mat­ter. In 2014, the SEC intro­duced a regime of reg­u­la­tions regard­ing busi­ness con­ti­nu­ity, under which it fined the NYSE $14 mil­lion in 2018. The exchange became the first fined under the regime for a four-hour break in trad­ing in July 2015.

System Flawed

This inci­dent demon­strates that even tra­di­tion­al finan­cial sys­tems remain flawed, even as cryp­to skep­tics scru­ti­nize blockchain pro­to­cols and decen­tral­ized finance. Accord­ing to them, even when cryp­to mar­kets are up, this could only be the result of manip­u­la­tion.

How­ev­er, in spite of its grow­ing pains, blockchain tech­nol­o­gy was par­tial­ly designed to address the flaws of finan­cial infra­struc­ture. For instance, trad­ing plat­form Robin­hood sus­pend­ed the trade of pop­u­lar meme stocks last year, which many traders decried as manip­u­la­tion. A decen­tral­ized exchange oper­at­ing accord­ing to smart con­tracts would be unable to make such an arbi­trary deci­sion affect­ing investors.

Disclaimer

BeIn­Cryp­to has reached out to com­pa­ny or indi­vid­ual involved in the sto­ry to get an offi­cial state­ment about the recent devel­op­ments, but it has yet to hear back.

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