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Nasdaq CEO defends exchange's response to glitch

August 23, 2013|By Andrew Tangel
  • NASDAQ President and Chief Executive Officer Robert Greifeld speaks at a news conference in New York on Feb. 15, 2006.
NASDAQ President and Chief Executive Officer Robert Greifeld speaks at… (Michael Nagle / Bloomberg…)

NEW YORK -- Nasdaq OMX Group Chief Executive Bob Greifeld defended the exchange operator's response to Thursday's three-hour trading outage, declaring "we came back successfully."

Greifeld made the rounds on business television channels Friday, a day after the Nasdaq Stock Market's embarrassing "flash freeze." A critical data feed's breakdown forced the exchange to halt buying and selling in all Nasdaq-listed stocks and options, paralyzing Wall Street for nearly half a trading day.

Speaking on CNBC, Greifeld said Nasdaq was "deeply disappointed" with Thursday's outage. He called for more "defensive driving," or increased attention to backup plans to prevent future technological problems caused by firms in the financial ecosystem.

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Nasdaq came under fire Thursday for what critics saw as a slow public response. But Greifeld insisted exchange officials were right to hold off making public statements.

“Our job first and foremost is to focus on understanding, solving the problem, which we did in the first half hour," Greifeld said.

Asked about any liability for the outage, Greifeld said the trading stoppage left all investors in the same boat.

“No trading happened," Greifeld told CNBC Friday. "It was a regulatory halt. So nobody was relatively advantaged or disadvantaged. Everybody was on the same footing.”

Nasdaq's outage quickly caught Washington's attention. The White House said President Obama was briefed on the situation.

Mary Jo White, chairwoman of the U.S. Securities and Exchange Commission, said the regulator would push to strengthen market safeguards.

“The continuous and orderly functioning of the securities markets is critically important to the health of our financial system and the confidence of investors," White said in a statement late Thursday.

Even though the trading interruption was resolved by day's end, White said it "was nonetheless serious and should reinforce our collective commitment to addressing technological vulnerabilities of exchanges and other market participants."

Nasdaq's outage, which follows a string of stock market breakdowns in recent years, could have been worse.

Had Thursday seen major economic news, investors might have had to stomach wild price swings. Trading volume, however, was already low, thanks to much of Wall Street being away for summer vacation.

The exchange won some praise for preventing chaos Thursday.

Jim Angel, a finance professor at Georgetown University, said the exchange seems to have learned its lesson from its botched handling of Facebook's initial public offering last year. Nasdaq's outage didn't result in a flood of errant trades or wild price swings that might otherwise lead to a flood of investor lawsuits seeking hundreds of millions of dollars.

"The market failed in a safe manner," Angel said. “We can live with the market down for a few hours. We cannot live with bad prices."

Nasdaq said its systems were operating normally early Friday.

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