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Post-'flash freeze' sentiment is 'get used to it'

Friday, 23 Aug 2013 | 11:03 AM ET
Adam Jeffery | CNBC

Amid the outrage and calls for change, Wall Street insiders took Thursday's "flash freeze" shutdown of the Nasdaq exchange as little more than a sign of the times.

With electronic trading getting faster and faster and systems more and more complex, investors probably need to acclimate to an environment where bugs periodically come up that can shut down systems indefinitely.

"The flash crash, Knight Trading, Goldman Sachs, automated trading issues in China last week and now the Nasdaq yesterday. Not sure we need to say anything other than 'get used to it,' " said Nick Raich, CEO at The Earnings Scout.

Indeed, all the furor over the trading glitch that shut down the Nasdaq—the second-largest exchange and the primary platform for trading tech stocks—resulted in no ostensible market damage.

It's somebody's job to say what's happening: Cramer
CNBC's Jim Cramer discusses Nasdaq CEO Bob Greifeld's comments on "Squawk Box" this morning. It has to be somebody's job to tell people what's happening, says Cramer.

(Read more: Nasdaq shuts down, but stock market shrugs it off)

Stocks finished higher Thursday, breaking a week-long losing streak, and traded up Friday.

Still, market veterans pondered what needs to be done to prevent the kinds of issues that came into full view with the May 6, 2010, flash crash and have persisted since.

"The whole system that we're building in the trading environment is so complex that there's a limited number of people who understand it," said John Edge, head of capital markets business development for NICE Actimize, a compliance solutions provider for financial and government institutions. "The checks and balances and controls were weak, and they continue to be weak."

(Read more: Nasdaq CEO 'disappointed,' faults 'other person')

Edge previously worked in systems management for JPMorgan Chase and Lehman Brothers, so he has seen the evolution of electronic trading.

What he's witnessed hasn't exactly given him high hopes for the future unless authorities get a stronger grasp on the technologies controlling the market and what can go wrong.

"I believe this can happen again. Our world is incredibly complex and we've got to be aware of it," Edge said. "The federal agencies have to work with private companies to do their best to protect the integrity of the markets."

One of the key issues at this point appears to be cost.

(Read more: Wall Street asks: Why can't Nasdaq get it right?)

Trading firms haven't been devoting the resources necessary to keep up with the ever-increasing market demands of a more complex environment.

"If it's a question of a purely technology issue, do regulators really want to get involved?" said Brad McMillan, chief investment officer for Commonwealth Financial, an independent broker dealer that manages $71 billion for clients. "You can make an argument that they do, but there's going to cost and it has to be balanced."

Edge believes that's a cost the market is going to have to bear.

"There's only so much a human can do," he said. "This is ridiculously difficult stuff to control."

By CNBC's Jeff Cox. Follow him @JeffCoxCNBCcom on Twitter.

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