WHEN: Today, May 7th at 8:15am ET
WHERE: CNBC's "Squawk Box"
Following is the unofficial transcript of a CNBC interview with Bob Greifeld, NASDAQ CEO, today on CNBC's "Squawk Box."
All references must be sourced to CNBC.
KERNEN: SCOTT WAPNER WILL BRING IN BOB. GOOD MORNING, SCOTT.
WAPNER: WE'RE HERE WITH THE NASDAQ CEO BOB GRIEFELD AS MANY QUESTIONS PERSIST OVER WHAT HAPPENED YESTERDAY. BOB CAN YOU PUT YOUR FINGER ON EXACTLY WHAT THE ISSUE WAS YESTERDAY?
GREIFELD: I THINK WE HAVE TO START WITH MACRO ECONOMIC CLIMATE. CLEARLY THE MARKET WAS NERVOUS. WE HAD THE CRISIS IN GREECE. WE HAD THE RIOTS STARTING THAT WAS CONTRIBUTING THEN WE SAW ACTIVITY IN THE FUTURES MARKET. THE FUTURES MARKET LED THE EQUITY MARKET. THE EQUITY MARKET RESPONDED TO THE MACRO, FUTURES AND THEN WE HAD AN ABNORMAL SELL-OFF THAT HAPPENED DURING A CERTAIN PERIOD OF TIME.
WAPNER: BLAMED ON WHAT? HIGH FREQUENCY TRADING? ELECTRONIC TRADING? TRADER ERROR? A MALFUNCTION?
GREIFELD: I THINK WE HAVE TO SEE WHAT CAN WE DO TO SOLVE THIS PROBLEM IN THE FUTURE? WHEN YOU LOOK AT MARKET STRUCTURE TODAY, WE HAVE A MARKETWIDE CIRCUIT BREAKER. IF WE HIT A THRESHOLD, WE'LL STOP THE MARKET. WE DO NOT HAVE SUCH A THING AT A STOCK LEVEL. SO THE PROBLEM YESTERDAY WAS RELATED TO A LOT OF STOCKS BUT NOT THE BROAD MARKET. SO WHEN WE WANT THE LEAD GOING FORWARD, WE HAVE TO THINK ABOUT HOW DO WE COME UP WITH A CIRCUIT BREAKER AT A STOCK LEVEL.
WAPNER: YOU ARE SAYING DEFINITIVELY THAT IT WAS NOT A PROBLEM WITH THE NASDAQ ELECTRONICS SYSTEM?
GREIFELD: NO IT DEFINITELY WAS NOT OUR SYSTEM FUNCTIONED FLAWLESSLY. WE LOOKED AT OUR CUSTOMER ACTIVITY AND IT WAS IN THE NORMAL RANGE. WHAT WE SAW HAPPEN IN THAT NERVOUS PERIOD OF TIME WAS FUTURES ACTIVITY WAS CRESTING --
WAPNER: IN 16 MINUTES OF TIME WE SAW A TREMENDOUS SWING IN THIS MARKET.
GREIFELD: IT REALLY WAS SHOCKING WHAT HAPPENED. IN THIS NERVOUS PERIOD OF TIME WE SAW THAT THE NEW YORK STOCK EXCHANGE AND STOCKS THEY LISTED, THEY DID NOT CALL A HALT BUT THEY BASICALLY WALKED AWAY FROM THE STOCK. THAT LACK OF LIQUIDITY IN THE TRADING OF THEIR STOCKS IN SUCH AS P&G AND ACCENTURE THAT NERVOUS PERIOD OF TIME HAD A DISPROPORTIONATE AFFECT ON WHAT HAPPENED TO THE STOCK.
WAPNER: IT SOUNDS TO ME LIKE YOU ARE BLAMING THE NYSE AND THE SPECIALISTS DOWN THERE
GREIFELD: NO
WAPNER: THEY HAVE SPEED BUMPS IN PLACE THAT SLOW DOWN THE PROCESS DOWN IF YOU WILL WHERE IF TRADING STOPS IF YOU WILL FOR A SECOND AT THE NEW YORK STOCK EXCHANGE FOR 90 SECONDS OR SO, IT CAN CONTINUE ON OTHER ELECTRONIC EXCHANGES AS IT DID ON THE NASDAQ WHERE YOU SAW SOME OF THE REAL SWINGS IN PROCTER & GAMBLE FOR EXAMPLE WHICH WAS A KEY QUESTION AS PROCTER & GAMBLE SHARES CAME DOWN TO JUST $56 AND NOT BELOW THAT AT THE NEW YORK STOCK EXCHANGE. THEY TRADED HERE AT 39 AND CHANGE. HOW DID THAT HAPPEN?
GREIFELD: SO LET'S GO WITH THAT SPEED BUMP COMMENT. THERE'S A DIFFERENT WAY TO LOOK AT IT. YOU HAVE THE PRIMARY MARKET, THE LISTING MARKET DECIDING NOT TO SUPPORT THE STOCK AND NOT TRADE IT AND TO STOP TRADING, THAT SENDS A SIGNAL. A SIGNAL TO A VERY NERVOUS MARKET. THAT SIGNAL WAS A NEGATIVE SIGNAL THAT THERE'S SOMETHING WRONG WITH THIS STOCK. SO INSTEAD OF STANDING BEHIND IT, THEY BASICALLY WALKED AWAY FROM THAT. AND IT'S EQUIVALENT TO WHAT HAPPENED BACK IN THE DAY WHEN WE HAD TELEPHONE MARKETS WHERE TRADERS DIDN'T ANSWER THE TELEPHONE TO INCOMING ORDERS. WE HAD A SITUATION WHERE MARKETS SOAR PRIMARY MARKET DOES NOT RESPOND AND IT HAD A DISPROPORTIONATE IMPACT OF THE PSYCHE OF THE MARKET. RATIONALITY CAME BACK 16 MINUTES LATER AND STOCKS BOUNCE UP.
WAPNER: SHOULD BE THERE SOMETHING IN PLACE TO PREVENT A PROCTER & GAMBLE THOUGH IN THE FIRST PLACE?
GREIFELD: THAT'S WHAT I'M SAYING.
WAPNER: TRADING DOWN FROM TRADING DOWN TO $39 DOLLARS ON THE NASDAQ
GREIFELD: WE NEED TO LOOK AT A CIRCUIT BREAKER PER STOCK. SO TODAY WE HAVE A CIRCUIT BREAKER PER MARKET. THE MARKET GOES DOWN BY 1,000 POINTS, CIRCUIT BREAKERS KICK IN. NOTHING EQUIVALENT AT THE STOCK LEVEL. WE WANT TO LEAD THE DISCUSSION TO MOVE THAT FORWARD.
GREIFELD: YOU ARE LOCKED IN A FIERCE COMPETITION WITH THE NEW YORK STOCK EXCHANGE IN TERMS OF MARKET SHARE AND OTHER AREAS.I WANT YOU TO LISTEN TO A SOUND BITE FROM DUNCAN NIEDERAUER CEO OF NYSE AND WE'LL REACT TO HIS COMMENTS LETS LISTEN TO THAT.
NIEDERAUER: MY GUESS IS WHAT WE'LL FIND WHEN WE LOOK AT THE VOLUME AND WE'RE PULLING IT NOW IS IT WASN'T A FAT FINGER PROBLEM.IT WASN'T A HUGE AMOUNT OF VOLUME GOING THROUGH. YOU AND I COULD SEND 1,000 SHARES TO SELL AT THE MARKET AND IF THERE'S NO BIDS ON THAT SYSTEM, THE COMPUTER WILL GO FIND IT AND TRADE WAY DOWN. ALL OF THOSE TRADES WILL BE TAKEN OFF THE TAPE. MY GUESS IS IF YOU WENT BACK AND REDID THE TAPE FOR TRADES THAT WE COULD GUESS WOULD BE TAKEN OUT, THE DOW SHOULDN'T HAVE BEEN DOWN AS MUCH AS IT WAS DOWN BECAUSE ALL THAT VOLUME IN P & G DURING THAT PERIOD NONE OF THAT WAS HERE. WE DIDN'T TRADE THE STOCK FOR 90 SECONDS.
WAPNER: YOUR REACTION TO THAT IS THIS AN INDICTMENT OF THE ELECTRONIC TRADING SYSTEM?
GREIFELD: NO ITS AN INDICTMENT OF THE FACT THAT THEY DIDN'T TRADE THE STOCK FOR 90 SECONDS RIGHT. SO YOU HAVE A MARKET IN A TIME OF TURMOIL. THE PRIMARY MARKET SAYS I WON'T TRADE. WHAT DO YOU THINK THAT SENDS AS A SIGNAL TO THE REST OF THE MARKET? YOU LOOK AT THE NASDAQ LISTED STOCKS. MICROSOFT, INTEL, CISCO, THEY WENT DOWN BY A SMALL AMOUNT. YOU LOOK AT P AND G AND ACCENTURE AND THEY WENT DOWN BY LARGER AMOUNT. WE PROVIDED THE MARKET THE CONTINUOUS MARKET SUPPORT FOR OUR STOCKS DURING THIS ENTIRE PERIOD OF TIME THE LISTED STOCKS AT NYSE DID NOT ENJOY THAT LUXURY. STOPPING FOR 90 SECONDS IN A TIME OF CRISIS, THAT'S THE EXACT EQUIVALENT OF NOT PICKING UP THE PHONE. THAT'S EXACT EQUIVALENT OF GOING TO YOUR BANK TELLER AND THEM SAYING WE'RE SHUT.YOU'RE NERVOUS. YOU WANT MONEY OUT OF THE BANK. BANK TELLER SAYS CAN'T DO IT.
WAPNER: THERE ARE OTHERS WHO WOULD SAY SOMEBODY SAW SOMETHING WRONG SO THEY STOPPED IT RATHER THAN LET IT ROLL OVER SOMEWHERE ELSE AND CONTINUE TO TRADE IN THE CRAZILY WILD SWINGS.
GREIFELD: YOU HAD INVESTORS THAT WANTED TO BUY AND SELL IN THIS MARKETPLACE OBVIOUSLY. YOU HAD THE PRIMARY MARKET REMOVING THEIR LIQUIDITY FROM THE MARKET IN THIS TIME.
GREIFELD: LET'S TALK ABOUT JUST ELECTRONIC TRADING IN GENERAL.
GREIFELD: LET ME JUST SAY A MARKET IS DEFINED AS A MARKET THAT OPERATES.WHEN YOU SHUT A MARKET, IT'S AN ABSENCE OF A MARKET.
GREIFELD: YOU ARE A PIONEER OF ELECTRONIC TRADING THE MACHINES CAN'T TALK YOU ARE THEIR VOICE. WHY IS THIS THE BEST SYSTEM THAT WORKS?
GREIFELD: FIRST YOU HAVE TO UNDERSTAND THAT MACHINES DON'T OPERATE BY THEMSELVES.THEY ARE PROGRAMMED BY PEOPLE TO ACT IN A CERTAIN WAY AND PEOPLE ALWAYS HAVE THE ABILITY TO OVERRIDE THAT. SO WHEN YOU LOOK AT HOW WALL STREET WORKS TODAY, YES, COMPUTERS LAUNCH MANY ORDERS. BUT THEY ARE CONTROLLED JUST LIKE AN AIRPLANE IS CONTROLLED. SO IT'S A FALSE STATEMENT TO SAY THE COMPUTERS ARE TAKING OVER THE MARKET. THERE'S ALWAYS A MANUAL OVERRIDE TO EVERY ASPECT OF THE MARKET AS EXIST TODAY. CLEARLY COMPUTERS BROUGHT GREAT AUTOMATION AND EFFICIENCY TO THE MARKET AND INVESTORS HAVE BENEFITED. WHEN YOU LOOK AT THE EFFICIENCY OF THE MARKET THE DEPTH AND LIQUIDITY OF THE MARKET YESTERDAY WAS A ROUGH DAY. IN OUR MARKETPLACE, YOU LOOK AT OUR STOCKS. THE TOP TEN LOSERS WERE 22%. NEW YORK WAS 44%. FUNDAMENTAL DIFFERENCE WHEN YOU LET A MARKET OPERATE AS COMPARED TO WHEN YOU LET A MARKET BE STOPPED. AS YOU LISTEN TO DUNCAN'S QUOTE, 90 SECONDS, STOP THE MARKET. HOW DO YOU DO THAT?
WAPNER: DID INVESTORS BENEFIT YESTERDAY?
GREIFELD: 22% VERSUS 44. YOU TELL ME?
WAPNER: THERE ARE THOSE WHO ARE GOING TO POINT TO THE ELECTRONIC TRADING SYSTEM, INDIVIDUAL INVESTORS, ONE YOU JUST SPOKE OF, INVESTORS OUT THERE YESTERDAY WHO ARE GOING TO LOOK AT THIS SYSTEM AND SAY HOW CAN I COMPETE WITH THESE HIGH ALGORITHMIC TRADING SYSTEMS, THESE COMPUTER SYSTEMS THAT ARE RUNNING EVERYTHING AND WHAT IS YOUR RESPONSE TO THAT IN TERM OF WHAT THIS DOES TO OVERALL INVESTOR CONFIDENCE?
GREIFELD: FIRST OFF, WHEN YOU HAVE THIS SWING IN THE MARKET, IT'S NOT GOOD. WE HAVE TO STEP BACK AND REFLECT TO SAY WHAT CAN WE DO BETTER? OUR INITIAL REACTION OF THINKING ABOUT IT ALL LAST NIGHT IS THE CIRCUIT BREAKER CONCEPT WHICH WORKS AT THE BROAD MARKET LEVEL. WE HAVE TO LOOK TO SEE HOW WE CAN UPDATE THAT AND MAKE THAT MORE INTELLIGENT FOR THIS TIME SO CLEARLY TODAY WITH 24 HOURS OF INTENSE THINKING ABOUT IT, A CIRCUIT BREAKER AT A STOCK LEVEL CAN HELP. IF WE HAVE A P AND G SITUATION, OKAY, IT HIT A CIRCUIT BREAKER. MAKE SURE IT IS INDUSTRY WIDE. ALL MARKET PARTICIPANTS. SO WE WOULD SAY THAT'S A KEY THING.WE HAVE TO THINK ABOUT GOING FORWARD TO MAKE THIS MARKET BETTER. I THINK THAT WILL INCREASE INVESTOR CONFIDENCE IN THE MARKET KNOWING THAT THAT KIND OF CAPABILITY IS THERE.
WAPNER: SHOULD INVESTORS HAVE CONFIDENCE IN THE MARKET TODAY?
GREIFELD: I THINK THEY SHOULD. I CERTAINLY SEE THAT WHEN YOU LOOK AT THE MARKET YESTERDAY IN THESE TIMES OF EXTREME STRESS, WE HAD 16 MINUTES WHERE WE HAD A LACK OF SUPPORT FROM THE PEOPLE DESIGNATED TO SUPPORT THE STOCK AND HELP DRIVE IT DOWN FOR 16 MINUTES BUT RATIONALITY CAME BACK. AFTER THE 16 MINUTES THE MARKET SNAPPED BACK. THE SYSTEMS WORKED. WE HAD A SUCCESSFUL CLOSING AUCTION. WE'RE PROUD AT THE END OF THE DAY HOW OUR MARKETS FUNCTIONED.
WAPNER: I HAVE TO SEND IT BACK TO THE GUYS BUT HAVE YOU SPOKEN TO MARY SHAPIRO, SEC OR ANYBODY IN WASHINGTON ABOUT THE SITUATION AND WHAT WAS THE SUBSTANCE OF THOSE CONVERSATIONS?
GREIFELD: YEAH OBVIOUSLY WE'RE DEALING WITH THE SITUATION REALTIME YESTERDAY AS IT HAPPENED. WE HAVEN'T HAD A TIME TO STEP BACK AND REFLECT IN A THOUGHTFUL WAY. WE WERE CERTAINLY ENGAGED WITH THE S.E.C. AND OTHERS. THEY WERE DEFINITELY INVOLVED AND SO WITH A THE TREASURY.
WAPNER: BOB, THANK YOU FOR JOINING US THIS MORNING. GUYS, BACK TO YOU.
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