When: Today, Friday, August 23rd
Where: CNBC's "Squawk Box"
Following is the unofficial transcript of a FIRST ON CNBC interview with NASDAQ OMX CEO Robert Greifeld. Following is a link to the interview on CNBC.com: http://video.cnbc.com/gallery/?video=3000193392.All references must be sourced to CNBC.
ANDREW ROSS SORKIN: I AM JOINED BY BOB GREIFELD CEO OF NASDAQ OMX. OF COURSE, THE MAN OF THE MOMENT. WE THANK YOU FOR BEING HERE TO HELP US UNDERSTAND AND TRY TO FIGURE OUT WHAT HAPPENED HERE. OBVIOUSLY, A LOT OF FRUSTRATION. I DON'T NEED TO TELL YOU HOW MUCH FRUSTRATION THERE HAS BEEN ABOUT THIS. JUST EXPLAIN, IF YOU COULD, WHAT EXACTLY HAPPENED BECAUSE I THINK MOST OF US STILL DON'T REALLY UNDERSTAND.
GREIFELD: SURE. WHAT HAPPENS IS THAT WE HAVE A DATA FEED WHICH CONSOLIDATES THE TRADING FOR 13 EXCHANGES. WE DO THAT FOR THE INDUSTRY. THAT HAD A PROBLEM. AS SOON AS WE SAW THAT IT HAD A PROBLEM, WE HAD A FUNDAMENTAL CONCERN. WE KNEW PROFESSIONAL TRADERS HAD ACCESS TO INDIVIDUAL DATA FEEDS, BUT THE TRADITIONAL LONG INVESTOR, RETAIL INVESTOR NOW, DIDN'T HAVE THE SAME INFORMATION. BECAUSE OF THAT, WE HALTED THE MARKET.
SORKIN: SO ANY INFORMATION IS ASYMMETRY. THE HEDGE FUNDS AND SOME OF THE BIG BANKS HAD ACCESS TO –
GREIFELD: THE HIGH FREQUENCY FIRMS WOULD HAVE ACCESS TO PROPRIETARY FEEDS INDIVIDUAL EXCHANGES, THE CONSOLIDATED FEED WHICH WE OPERATE HAD A PROBLEM, WASN'T GIVING QUOTES OUT, WE HAD TO HALT THE MARKET BECAUSE OF THAT. WE DIDN'T WANT TO HAVE A SITUATION WHERE INFORMATION IS ASYMMETRY AS YOU SAY.
SORKIN: HAVE YOU INVESTED ENOUGH IN YOUR SYSTEMS? BETWEEN THIS PROBLEM AND HONESTLY THE FACEBOOK FIASCO,THERE ARE PEOPLE OUT THERE SAYING, YOU KNOW, HOW IS THE NASDAQ IN BUSINESS THIS WAY WHEN THEY CAN HAVE A PROBLEM OF THESE TYPES OF MAGNITUDES?
GREIFELD: WELL, THE FIRST THING IS WE INVEST A LOT OF MONEY IN OUR SYSTEMS. AND OUR UPTIME IS 99.9 SOMETHING PERCENT. SO IT'S VERY HIGH. BUT I THINK WHERE WE HAVE TO GET BETTER IS WHAT I CALL DEFENSIVE DRIVING. SO THE SYSTEMS ARE ABLE TO OPERATE BY THEMSELVES AND THIS SYSTEM HAS BEEN IN OPERATION FOR 20 YEARS. DEFENSIVE DRIVING MEANS WHAT DO YOU DO WHEN ANOTHER PART OF THE ECOSYSTEM, ANOTHER PLAYER, HAS SOME BAD EVENT THAT TRIGGERS SOMETHING IN YOUR SYSTEM? YOU HAVE TO, AND IT'S OUR RESPONSIBILITY AS SYSTEMS OPERATOR, TO HANDLE THOSE KIND OF UNFORESEEN SITUATIONS.
SORKIN: AND IT SOUNDS LIKE YOU ARE ELUDING TO THE NEW YORK STOCK EXCHANGE AND ARCA? ARE THEY TO BLAME IN THIS.
GREIFELD: NO. WE AS A PROVIDER HAVE TO BE RESPONSIBLE FOR GOOD DEFENSIVE DRIVING. THERE WILL ALWAYS BE ISSUES WITHIN THE ECOSYSTEM. WE DON'T LIVE IN A MONOPOLISTIC WORLD TODAY.RIGHT. WE HAVE A LOT OF COMPETITORS, 13 EXCHANGES, A LOT OF MEMBER PARTICIPANTS AND IT IS OUR JOB TO MAKE SURE, TO KNOW WHATEVER HAPPENS OUTSIDE--
SORKIN: BUT IT SOUNDS LIKE THIS PIPE IS YOUR PIPE?
GREIFELD: WHAT'S THAT? IT'S OUR SYSTEM. NO.
SORKIN: AND SO THE QUESTION IS, SHOULD THERE BE MORE PIPES? YOU KNOW, THIS HAS BEEN A CLOSED SYSTEM AND YOU GUYS HAVE OWNED THE PIPE. WOULD WE BE BETTER OFF FROM A SYSTEMIC ISSUE BY HAVING MORE PIPES AND MORE PLAYERS?
GREIFELD: MORE THAN ONE CONSOLIDATOR, I CERTAINLY COULDN'T ARGUE AGAINST THAT. BUT I DO WANT TO HIGHLIGHT THE FACT THAT IN THE WORLD WE LIVE IN DEFENSIVE DRIVING IS AN IMPORTANT SKILL. WE WILL GET BETTER AT IT. WE SPEND AT LOT OF TIME AND EFFORT COMING UP WITH SCENARIOS WHERE OTHER THINGS HAPPEN OUTSIDE OF OUR CONTROL AND HOW WE RESPOND TO IT. AND THIS IS AN EXAMPLE OF THAT.
SORKIN: LET ME READ YOU A QUOTE. ARTHUR LEVITT, THIS IS THE FORMER CHAIRMAN OF THE S.E.C. SAID, "THE WORST PART OF ALL THIS IS THE LACK OF DISCLOSURE. THE LACK OF TRANSPARENCY.THIS IS INEXCUSABLE." IT TOOK THE NASDAQ, FRANKLY, FAR TOO LONG TO RESPOND PUBLICLY, AND WE ARE HAPPY YOU ARE HERE THIS MORNING. BUT HOW DO YOU THINK ABOUT THE ISSUE OF DISCLOSURE AND TALKING TO THE PUBLIC ABOUT THESE ISSUES?
GREIFELD: WELL, I WOULD HAVE TO DISAGREE IN A QUITE EMOTIONAL WAY WITH THAT STATEMENT. WHAT'S INTERESTING IS WE HAVE TO FOCUS ON THE OPERATIONAL ASPECTS OF THE PROBLEM WHILE THE PROBLEM IS TRANSPIRING. SO WE DID A NUMBER OF KEY THINGS. ONE, IS WE HAD AN OPEN LINE WITH THE COMMITTEE, ALL THE OTHER EXCHANGES. FROM WHEN THE PROBLEM HAPPENED. OPEN LINE. CONSTANT COMMUNICATION, NOT JUST EPISODIC, BUT CONSTANT COMMUNICATION. WE HAD AN OPEN LINE WITH THE INDUSTRY. SIFMA. STARTED ABOUT ONE O'CLOCK, ONE THIRTY. SO OUR FELLOW EXCHANGES, OUR CUSTOMERS HAD OPEN LINES INTO US. IN ADDITION TO THAT, WE SENT OUT 22, 22 HEAD TRADER ALERTS TO THE ENTIRE COMMUNITY.
SORKIN: TO THE PROFESSIONAL COMMUNITY?
GREIFELD: YOU HAVE TO FOCUS ON THE OPERATIONAL IMPACT. ALL RIGHT. SO THE PEOPLE DIRECTLY INVOLVED WITH THE PROBLEM. THOSE PEOPLE HAD THE STAKE IN THE GAME OF THE MOMENT WHO HAD TO DO THINGS THEMSELVES TO RESPOND TO IT. WE WERE IN CONSTANT COMMUNICATION WITH THEM. RIGHT. WERE WE ON THE TV AT THE TIME? NO.
SORKIN: SHOULD YOU HAVE BEEN?
GREIFELD: NO, DEFINITELY NOT.
SORKIN: WHY NOT?
GREIFELD: OUR JOB FIRST AND FOREMOST IS TO FOCUS ON UNDERSTANDING, SOLVING THE PROBLEM, WHICH WE DID IN THE FIRST HALF HOUR. THEN COORDINATING WITH THE OTHER PEOPLE IMPACTED TO MAKE SURE THAT WE COME BACK IN A VERY ORDERLY AND FAIR WAY. AND WHAT WE'RE SATISFIED WITH YESTERDAY IS WE TOOK THE PROPER AMOUNT OF TIME, ALL RIGHT, TO MAKE SURE THAT THE TESTING WAS DONE, THAT THE COMMUNICATION YESTERDAY WAS SO STRONG AND WE GOT THAT COMMUNICATION DONE. WE CAME BACK AND CAME BACK SUCCESSFULLY. SO IT'S NOT OUR JOB, NOR WILL IT BE FOR US TO GO ON THE PRESS, YOU KNOW, TO THE PRESS TO PUBLIC WHILE WE ARE FOCUSING ON THE ISSUE.
SORKIN: WHAT IS NASDAQ'S LIABILITY IN ALL OF THIS? WHEN YOU MEASURE THE POTENTIAL LIABILITY AS A RESULT OF WHAT TOOK PLACE YESTERDAY, HOW DO YOU ESTIMATE WHERE THINGS STAND HERE?
GREIFELD: WELL THE WAY WE HANDLED THE PROBLEM IS THERE IS REALLY NO LIABILITY IN THAT YOU LOOK AT THE FACT THAT WE HALTED THE MARKET. AS SOON AS WE SAW THERE WAS INFORMATION ASYMMETRY AND PROFESSIONAL TRADERS COULD HAVE SOME ADVANTAGE OVER THE TRADITIONAL LONG INVESTOR, WE HALTED THE MARKET. NO TRADING HAPPENED. IT WAS A REGULATORY HALT. SO NOBODY WAS RELATIVELY ADVANTAGED OR DISADVANTAGED. RIGHT. EVERYBODY WAS ON THE SAME FOOTING. WE CAME LIVE AT 3:25,THEN EVERYBODY STARTED AS IF IT WAS THE OPENING OF THE DAY. SO FROM THAT POINT OF VIEW AND WE HEAR THIS FROM OUR CUSTOMERS TODAY AND YESTERDAY THAT THIS WAS HANDLED WELL IN THAT EVERYBODY WAS IN THE SAME BOAT AT THE SAME TIME UNDER THE SAME CONDITIONS.
SORKIN: THE S.E.C. HAS PROPOSED A NUMBER OF NEW SYSTEMIC RULES AROUND EXCHANGES. THUS FAR, YOU WERE PUSHED BACK AND OTHER EXCHANGES WERE PUSHED BACK AROUND SOME OF THOSE RULES.WOULD YOU CHANGE YOUR VIEW ABOUT SOME OF THOSE RULES GIVEN THE EXPERIENCE OF YESTERDAY?
GREIFELD: WELL, I THINK WHEN YOU LOOK AT THE DETAILS OF THE RULES, THERE ARE ALWAYS WAYS TO QUIBBLE. BUT THE PURE SPIRIT OF THE RULES ARE THERE. AND WE THINK, IN FACT, WE WANT TO GO FURTHER ON THIS CONCEPT OF DEFENSIVE DRIVING. ALL RIGHT. WE HAVE 13 DIFFERENT EXCHANGES, WE HAVE HUNDREDS OF MARKET PARTICIPANTS. WE ARE ALL INTERCONNECTED IN A NUMBER OF FUNDAMENTAL WAYS. AND WE ALL HAVE TO BE AWARE OF THE OTHER PERSON WILL NOT ACT ALWAYS IN THE PROPER WAY. AND YOU HAVE TO HAVE YOUR SYSTEM BE ABLE TO HANDLE DEFENSIVE DRIVING. SO WE SUPPORT WHAT THE COMMISSION IS DOING. AND WE CERTAINLY THINK THIS SHOULD BE EVEN INTENSIFIED EFFORT AT HOW DO YOU BUILD A DEFENSIVE DRIVING MECHANISM?
SORKIN: WHAT DO YOU TELL TWO CONSTITUENCIES THIS MORNING? THE CLIENTS OF NASDAQ AND WHY THEY SHOULD HAVE CONFIDENCE IN THIS EXCHANGE AND WHAT DO YOU TELL THE PUBLIC WHO HAS SO MANY QUESTIONS ABOUT WHETHER THE PLAYING FIELD IS LEVEL, WHETHER THE SYSTEM WORKS,WHETHER THEY SHOULD HAVE CONFIDENCE IN THE MARKETS?
GREIFELD: RIGHT. SO, ONE, WE DEEPLY ARE DISAPPOINTED WITH WHAT HAPPENED YESTERDAY. WE ASPIRE FOR PERFECTION.RIGHT. WE WANT TO GET TO 100% UPTIME. WE SPEND A LOT OF TIME, EFFORT AND MONEY TO TRY TO GET THERE. WE DIDN'T GET THERE YESTERDAY, OBVIOUSLY, THAT'S APROBLEM. WE HAD TO CONTINUE ON THAT QUEST. BUT IT'S IMPORTANT TO THE RECOGNIZE THAT WE HAVE TO HAVE THE ABILITY TO HANDLE THE SITUATION PROPERLY WHEN A PROBLEM ARISES. I CAN NEVER COMMIT TO ANYBODY THAT THERE WILL NEVER BE A PROBLEM. WE HAVE TO COMMIT TO IS WE ARE GOING TO WORK AS HARD AS WE CAN TO GET TO 100% AND TO THE EXTENT WE CAN'T , WE CAN'T ACHIEVE PERFECTION, AND THERE IS AN ISSUE, THAT WE HAVE THE PROPER PROCEDURES IN PLACE TO RESPOND IT TO. THAT'S WHAT WE DID YESTERDAY. WE TOOK OUR TIME UNDERSTANDING WHAT THE PROBLEM WAS. WERE SOLVED THE PROBLEM AND THEN WE COORDINATED WITH THE INDUSTRY AND CAME BACK INA LOGICAL, ORGANIZED WAY. WE ARE QUITE PROUD OF THE FACT WE HAD AN ORDERLY MARKET CLOSE FOR THE BALANCE OF THE DAY.
SORKIN: TWO FINAL QUESTIONS.WHAT DOES THIS DO TO YOUR IPO BUSINESS?
GREIFELD: WELL, ONE, IS I THINK PEOPLE RESPECT. AND WHERE WE ARE GETTING THE COMMENTS TODAY THAT WE DID HANDLE THIS PROCESS IN A PROPER WAY. WE WANT TO GET TO PERFECTION. WE WANT TO GET TO 100% RELIABILITY AND WE ARE GETTING BETTER AT THAT ALL THE TIME. YOU CAN SEE THE INSTANCES OF TRADE PROBLEMS IN THE INDUSTRY HAS ACTUALLY GONE DOWN. YOU CAN'T QUITE GET THAT FROM THE PRESS. WHAT YOU LOOK AT DAY BY DAY, WEEK BY WEEK,MONTH BY MONTH IN THIS FRAGMENTED WORLD, THE WORLD IS GETTING BETTER. SO I THINK PEOPLE RECOGNIZE THAT.
SORKIN: FINAL QUESTION, HAVE YOU HAD A DISCUSSION WITH YOUR BOARD ABOUT THIS SITUATION AND WHAT HAVE THEY SAID ABOUT YOU? MEANING, IS YOUR JOB ON THE LINE IN ALL OF THIS?
GREIFELD: WELL CERTAINLY,IT'S MY JOB TO UPDATE THE BOARD. WE HAVEN'T DONE THAT YET, BUT WILL DO THAT IN SHORT ORDER THERE. CERTAINLY, WE STAND BY OUR PERFORMANCE AGAIN OVER AN EXTENDED PERIOD OF TIME. WE ARE OPEN FOR BUSINESS IN THE U.S., AROUND THE WORLD. WE OPERATE 70 MARKETS AROUND THE PLANET AND OUR TRACK RECORD IS SUPERB.IT'S NOT PERFECT. WE WANT TO GET THERE. WE WANT TO ASPIRE TO THAT, WE ARE WORKING HARD TO DO THAT.
SORKIN: BOB GREIFELD, WE APPRECIATE YOU COMING ON. WE APPRECIATE YOU HAVING THIS DISCLOSURE AND TRANSPARENCY AROUND IT. THOUGH I DO KNOW THERE STILL REMAINS A LOT OF FRUSTRATION. BUT THANK YOU AND WE DID THIS ON YOUR HOME COURT.
GREIFELD: THANK YOU.
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