"I would say to you [that] in this environment, markets and overseers of markets have got to be looking at whether that incentive payment should be made under these volatile circumstances," he said, adding, "Technology is a force that makes markets better, but people who oversee markets, particularly the regulatory types, have got to do a better job of blending the two."
The volatile swings in the U.S. markets this week have been blamed on program trading, among other issues, but Grasso said it's not the machines, "it's how you deploy the machines, with the right set of rules, circuit breakers, shock absorbers."
(To learn more about high frequency trading, see the CNBC.com Special Report Man vs. Machine: Inside the Complex World of Computer-Driven Stock Trading.)
"Much of what you see today is happening through the machines," he said, a big change from the days when Grasso was running the exchange and buyers and sellers dealt one-on-one through their brokers.
Electronic trading has eliminated some trading floor fixtures, including the "odd lot broker, the $2 broker, fixed commissions" and the market specialist, Grasso noted.
While you can't turn back the clock, he said, there are ways to limit the influence of program trading.
"What you can do is take the market structure and make it better as you know it. Making it better means learning what we would have done differently and doing it now," Grasso said. "I don't think you can bring back the specialists, but you can bring back certain obligations under certain volatile conditions, which will be very helpful to the public's confidence in this market."