And the pros say unless something is done, it will only be a matter of time before similar events happen, again. And the next time could be worse – far worse. At some point unexpected hiccups in technology could send the Street into spiral that will be almost impossible to stop.
“Hundreds of these systems interact all around the country – that’s the modern market making system,” explains trader Joe Terranova, , chief market strategist for Virtus. “And we’re learning it doesn’t always work.”
That's scary.
Henry Blodgett, of Business Insider, says Wall Street needs to wake up.
“Trading relies on technology. When you have a big technical error – it’s a warning.”
A serious warning.
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According to CNBC sources, at least 9 stocks in the Dow experienced unusual activity in the wake of Knight's “technology issue.” They were Alcoa , American Express , BofA, Caterpillar, DuPont, Pfizer, AT&T, GE and Verizon. (At the time of writing it had yet to be determined if the correlation was direct or indirect.)
“I’m surprised there wasn’t a backup technology to prevent this from happening,” adds trader Stephen Weiss, managing partner at Short Hills Capital.
On a positive note, the traders say the good news is that it wasn’t worse. "Humans on the floor of the NYSE – the market makers – were able to intervene and halt stocks. That prevented wider problems from happening," explains Weiss.
“We need to re-populate the floors of the exchanges,” says Terranova. “We need more people. We need to get away from completely electronic platforms.”