It’s that time of year when unusually cold weather can come out of nowhere. What better time to talk about the concept of flash freeze.
A flash freeze is an event in which trading on an exchange suddenly shuts down. One of the most famous flash freezes occurred on the NASDAQ on August 22, 2013, halting trade for three hours. A flash freeze can be caused by a variety of information technology issues such as system overload, faulty software, volatile algorithmic trading performed by high frequency computers, and even deliberate cyber attacks.
Analysts and technology experts believe that flash freezes will become more and more common in the future as electronic trading becomes more predominant, more complex and faster. Cyber-attacks will likely become more sophisticated and frequent as well. Flash freezes can have a particularly negative impact if the market is already bearish, causing investors to panic and stock prices to drop even more The length of a flash freeze is also important: a freeze of a few hours may not affect the market much, but a freeze of a day or more could seriously dampen investor confidence. Freezes are also more of a problem for day traders than a person investing long term.