Today, another sign of just how vulnerable investment markets are appeared. The NASDAQ shut down for more than three hours, bringing many trades to a halt and hearkening back to the "flash crash" of May 2010, when the Dow fell nearly 1,000 points due to an incorrect shutdown of financial markets. Indeed, not all stocks were completely in lockdown. Some stocks, including Apple (AAPL) continued to trade, albeit in a limited fashion.
What went wrong? NASDAQ blames the outage on an inability for its electronic trading system ARCA to connect with the New York Stock Exchange. Basically, the Security Information Processor (SIP) of one place ostensibly failed to connect with the other, causing a standstill in trading information.
While the NASDAQ has failed in the past (it was brought down by squirrels in 1987 and 1994), standstills of any magnitude greatly worry retail investors, regular people who do not have access to high-speed trading algorithms or legions of expert traders. Failed stock exchanges are always worrisome, but it is important to remain calm and vigilant in the event of any mishap. When the next major freeze occurs, just remember that it isn't the first day the financial markets stood still.
Andrew Jabara
President of the E-$tock Club
