Storm bells for our stock markets
The New York Stock Exchange’s two-day shutdown in the face of Hurricane Sandy is more than a sobering episode.
Arthur LevittThe Wall Street Journal
The New York Stock Exchange’s two-day shutdown in the face of Hurricane Sandy last week is more than a sobering episode, said Arthur Levitt, a former chairman of the Securities and Exchange Commission. “It reflects a pattern of failure in the core functioning of U.S. financial markets.” Well before the storm shut down the world’s largest stock market, we saw the second largest, Nasdaq, bungle Facebook’s IPO last May. Those failures, along with a spate of “software errors in high-speed trading firms and ‘fat finger’ errors by human traders,” have revealed the “interior plumbing” of U.S. markets to be in grave disrepair. This is a problem of will, not technology. We have the communications needed “to disperse market operations across multiple sites around the country and the world.” Yet U.S. financial markets remain “too dependent on the equipment and personnel in Manhattan,” where, as we’ve known since 9/11, they are always at “risk of a complete and instantaneous shutdown.” If our markets don’t get serious about becoming more resilient to disasters, investors will abandon them altogether. “The reputation of the U.S. as the world’s financial capital is at stake.”