April 25, 2013
On April 25, 2013, CBOE Holdings, Inc. (NASDAQ: CBOE), which is the holding company for Chicago Board Options Exchange (the "CBOE") had a bad day, to put it mildly. The largest U.S. options exchange and creator of listed options had to delay the opening of CBOE options trading from 8:30 a.m. until 11:50 a.m. CT. According to the organization's Press Release:
The malfunction that impacted CBOE was an internal systems issue and not the result of any outside influence. The issue, which affected validation of certain orders and the communication of cancel/fill reports, has been corrected. . .
The Flash Crash. The Facebook NASDAQ IPO. BATS, The Knight Meltdown. And now CBOE. What more will it take before the regulators and the industry demand a workable contingency plan from those with their fingers on the ON/OFF switches?
Wall Street's regulators simply cannot sit idly by as our markets are crippled by technological glitches, hacking, negligent launches of new software, and the failure to implement critical redundancies. In recent memory, investors have had to endure with flash crashes, market operators' software stalls and stutters, and trading desks that flood the markets with erroneous orders. At some point, regulators must step in and levy some serious fines and demand back-up technology and facilities.
Unless we grapple with this problem now, we are going to find ourselves in a very frightening place with no investor confidence and folks with flashlights looking for a re-set switch.