In a comment on the Nasdaq shut down Warwick Business School Assistant Professor of Finance Arie Gozluklu said: “This is not the first time that trading on an exchange has suffered a technological problem and probably not the last time. There were other examples such as the Flash Crash in 2010, the Facebook IPO, while Goldman Sachs was hit by a bug and there was the Knight Capital case last year. There is speculation this is down to the number of high frequency traders, as algorithmic trading now makes up between 50 and 60 per cent of trades in the US.“
Nasdaq could see its reputation harmed by this. Nowadays exchanges are profit-making organisations with the traditional big two of the New York Stock Exchange and Nasdaq facing competition from many alternative exchanges in the US. It could put off firms going public due to these types of liquidity problems which limit access to capital. Trust in the exchange is very important and the US Securities and Exchange Commission are likely to push for more stringent rules to stop these system failures. There could be fines or penalties for technological problems, but it should also take into account other players in the game, not just the exchanges.”
Dr. Gozluklu researches the microstructures of financial markets.
