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Net Net: Promoting innovation and managing change

Market pros: Despite 'crashes,' all's well

Technology world imperfect: Nasdaq CEO

Take all your Flash Crashes and "Knightmares" and trading "glitches" and, well, chill out. Wall Street pros say market structure is pretty much better than ever.

Fresh off the computer issue—or "glitch"—that shut down floor trading on July 8 at the New York Stock Exchange comes a survey from the Tabb Group showing confidence in how the market operates is at its highest level in at least five years.

The survey of 266 market professionals saw 64 percent of respondents say their level of confidence in market structure was either "very high" or "high."

That's something considering the run of bad publicity during that period.

There was the "Flash Crash" of 2010 that saw the Dow industrials lose more than 600 points in a few minutes. Then in 2012 there was the major fail during the Facebook initial public offering that saw the company's debut delayed, as well as the Knight Capital "Knightmare" fiasco that caused violent price swings for about 150 publicly traded companies.

And, of course, there was the impassioned public debate triggered in 2014 when Michael Lewis published "Flash Boys," a book that skewered the high-frequency trading industry and saw the author famously call the stock market "rigged."

The fallout from all those events and other mishaps along the way certainly seems to have abated.

"There is no golden solution in terms of how market structure should function," said Sayena Mostowfi, Tabb's head of U.S. equities research. "What we're great at recognizing is that there's always room for improvement. It's not perfect now and I don't think it's ever going to be perfect."

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Indeed, the recent NYSE trading problems that saw the exchange shut down for more than four hours actually drew plaudits for the way it was handled, and showed the strength of current market structure.

One of the raps against the new age of trading is over "fragmentation," or the numerous exchanges, both lit and unlit, across the market landscape. In this case, though, that's what helped the system work.

"If you go back 20 years, if the phone system goes down at the NYSE everything's done, nobody can trade," said JJ Kinahan, chief strategist at TD Ameritrade. "We're in a world now where because there are multiple venues for people to trade, even with an exchange going down our clients are virtually unaffected by it as we can roll orders to other exchanges."

Market structure sentiment had been on the decline since the Flash Crash and hit its low point in April 2013 with the "Hash Crash," a reference to when The Associated Press' Twitter account was hacked and someone posted a message that explosions at the White House had injured President Barack Obama. At that point, a Tabb survey found just 30 percent had high or very high confidence in market structure.

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Since then, though, momentum has shifted, with even Lewis' polemic unable to rattle market pros. Just 5 percent of respondents said current market structure is "weak," the lowest level since the 3 percent following the Flash Crash.

"What people are realizing is we're not completely reliant on one person or one source," Kinahan said. "One of the things people do accept is technology is occasionally going to have a hiccup."

Traders have finally begun to accept the many changes to the way market business is conducted, said Richard Ross, head of technical analysis at Evercore ISI.

"In terms of the NYSE shutdown, the fact that trading went on without skipping a bit is probably more encouraging," he said. "It's more of an endorsement of a system than an indictment of a system."

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