“Does Nasdaq have its priorities straight? The Securities and Exchange Commission is right to worry that it doesn’t — that the market is favoring lucrative high-speed trading customers at the expense of Uncle Jack in front of his computer at home in his slippers.

“Nasdaq’s three-hour shutdown last week raises the question anew, but the SEC first identified it in March, when it proposed rules that would set standards for electronic trading and make the exchanges more accountable for preventing outages. The exchanges are pushing back, yet the events of last week make it clear: The SEC has to move quickly.

“The culprit behind Nasdaq’s failure was a still-mysterious software error in its connection with the New York Stock Exchange’s electronic trading system. The breakdown meant that Nasdaq couldn’t collect all the pricing and order data through its securities information processor, or SIP, and distribute that data over what is called the consolidated tape. Nasdaq was thus unable to meet its legal obligation to be fair and transparent to all traders — whether that is a $500 billion mutual fund or Uncle Jack.

“Nasdaq Chief Executive Officer Robert Greifeld was right to call a systemwide halt, even though proprietary data feeds to professional traders continued. Otherwise, the national market system that Nasdaq is tasked with running would quickly have devolved into a private market in which high-frequency traders and hedge funds — or anyone paying Nasdaq a fee for customized data — held all the cards.”

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Read full Bloomberg article here