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Why the NYSE glitch was nothing for investors to worry about
Summer is usually a quieter time for stock trading. But on July 8, when the New York Stock Exchange shut down for nearly four hours, things were a little too quiet.
The shutdown was blamed on an “internal technical issue.” Against the backdrop of other events occurring that day, such as financial crises in China and Greece, and what proved to be an unrelated glitch that grounded United Airlines flights, investors were nervous.
But where investors ever at risk? Not really. The main risk to investors is if they have an open order in place when the exchange shuts down. In such a case, they may not know if an order was actually placed or if it had been canceled, which could lead to losses. Yesterday, however, the NYSE said in a note to traders that all open orders had been canceled for the day except the long-term requests to buy or sell put in by large institutional investors.
Investors were also able to trade NYSE-listed shares elsewhere. Just because a stock chooses to list itself on the NYSE, doesn’t mean that trading is restricted to that exchange. NYSE-listed stocks were traded on other exchanges, such as Nasdaq, during the outage.
Today, the New York Stock Exchange only handles 14 percent of trades. Compare that to only a few years ago, when over 80 percent of stock trades went through the NYSE.
Today, the New York Stock Exchange only handles 14 percent of trades. Compare that to only a few years ago, when over 80 percent of stock trades wen through the NYSE.
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Mutual fund prices could have been a concern, but ultimately were unaffected. The more worrying aspect of the NYSE glitch was the possibility that trading wouldn’t resume by the 4PM (Eastern Daylight Time) market close. That’s important because mutual funds rely on the NYSE closing prices to price their shares. Without a closing price to rely upon, it was unclear how funds were to report their Net Asset Value (N.A.V.) to investors. As trading resumed during the final hour of the trading day, that problem never materialized.
You should be investing for the long-term anyway. Ultimately the NYSE outage affected traders much more than investors. Or in the words of Warren Buffett, “Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
–Chris Horymski
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