NYSE Glitch Shows TradFi Also Flawed

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.