Thomas Farley, president of the NYSE, said in a statement that the company experienced “a technical issue and, consistent with our regulatory obligations, the decision was made to suspend trading as we worked to identify the cause and resolve it.”
The shutdown unnerved investors and markets alike, though for a variety of reasons, including the availability of other markets for trading NYSE issues, nothing catastrophic seems to have occurred.
Most surprisingly, within an hour or so into the trading halt, the NYSE stated that the shutdown was not caused by any kind of cyberattack. The NYSE also stated that two major data breaches of the day, reportedly involving the WSJ and United Airlines, were not connected. (United Airlines grounded dozens of flights and delayed hundreds more because of some sort of a systems issue early in the day. The Wall Street Journal’s home page at WSJ.com was apparently unavailable for about an hour at midday and the WSJ is investigating.)
The NYSE’s posture is disconcerting to say the least. No matter what caused the NYSE trading halt (cyberattack, bad leaver, software glitch, configuration difficulty, coding disruption or otherwise), it is not wise to rule out a cyberattack without first conducting an independent, truth-seeking investigation. And stating that the WSJ and United data breaches were not connected to the NYSE breach could very well be true but is also a bit aggressive.
The NYSE could say that the disruption does not appear to be caused by a cyberattack and that the disruptive events appear unrelated, but even that seems somewhat premature.
It’s like when a first-grader comes home from school with pneumonia and the school immediately declares that the kid did not catch it from a fellow student. The school’s conclusion might very well be true but it takes time to confirm and, if the school’s initial conclusion is inaccurate, the consequences could be severe.
It also strikes me as odd that the NYSE is vague on the one hand (“software issue of some sort”) and definitive on the other hand (“no cyberattack involved”).
When technological problems occur at an institution as critical and as historically reliable as the NYSE, as tempting as it might be to respond with bravado, the NYSE should opt for humility and deference. In today’s world where even the most basic operations have become technically driven and the “Internet of Things” rapidly envelops us all, there is nothing shameful about experiencing a technological breakdown. Technological breakdowns no longer define companies like the NYSE – how they respond to them does.
Moreover, the diagnostics of identifying technological issues (especially issues which can cause something as unusual as a four hour NYSE trading halt) are far from an exact science and can even be a guessing game early on. The most thoughtful and cautious tact is to investigate independently and deal with solid and definitive facts.
Independence is the most important notion above all else – especially when investigating technological mishaps. If the same IT team that could be held responsible for causing the NYSE shutdown is also reporting the situation to NYSE higher-ups, the higher-ups may not be getting the full truth.
Whatever the cause of the NYSE failure, its response should be multifaceted, intense, impartial and swift – and if handled correctly and appropriately, can be the kind of successful failure that will not only strengthen the NYSE’s infrastructure but will also reinforce the NYSE’s commitment to traders, partners and its many other fiduciaries in the global financial marketplace.
By leaping so quickly with definitive conclusions and broad-brush statements, the NYSE may have calmed jittery market participants and their resolute assurances may very well have been made sincerely and with good faith. However, despite their best intentions, the NYSE’s declarations may also unfortunately come back to haunt them.
Indeed, given the likelihood of a thorough and exhaustive SEC investigation, and perhaps even Congressional scrutiny, the NYSE’s rush to judgment may have unnecessarily made their situation far worse than just a four hour trading halt.