"Far too many investors are already concerned that our critical trading technology infrastructure is held together by dangling wires and duct tape," Dave Lauer, co-founder and chief technology officer of Kor Group LLC, wrote in an e-mail Wednesday. "Today definitely doesn't help dispel that fear."

The best and worst of electronic markets were on display Wednesday, when a computer malfunction forced a 3 1/2-hour halt on the NYSE that was easily sealed off from other venues. There are so many places to trade now that the NYSE and Nasdaq Stock Market have gone from handling 80 percent of volume in 1997 to 40 percent on average last month.

Fragmentation proponents

"The proponents of more fragmentation in the U.S. market are happy this happened, to show that competition of exchanges is a better thing," said Frank Maeba, managing partner at Breton Hill Capital in Toronto. "I personally think it's a bit messy."

Two people briefed on a preliminary review said the computer malfunction that knocked out trading probably stemmed from a software update that went awry. The NYSE must now verify the cause and report its conclusions to the U.S. Securities and Exchange Commission, said the people, who asked not to be named because the inquiry isn't public.

Tom Farley, the exchange's president, made the decision to suspend trading when it became apparent investors couldn't rely on the market to provide accurate data.

'Configuration problem'

"There was a configuration problem in our system," Farley said in an interview with Bloomberg television. "It likely had to do with an upgrade but that's premature and it's something that will come about as part of our full analysis of the situation."

The suspension, lasting from 11:32 a.m. to just after 3 p.m. New York time, temporarily removed the 223-year-old NYSE from the network of platforms that makes up the American equity market. That network kept running, however, as exchanges such as the Nasdaq Stock Market and Bats Global Markets Inc. picked up the runoff.

"If a client called up and wanted me to execute a trade, I could still do it," said Michael Antonelli, an institutional equity sales trader and managing director at Robert W. Baird & Co. in Milwaukee. "You can trade U.S. equities on lots of different venues. That's a plus and minus today."

The two NYSE venues affected by the shutdown handled about 14 percent of all U.S. stock volume in June, with the rest spread among competitors such as Bats and Nasdaq and dozens of dark pools and other private platforms operated by securities firms.

'Good reminder'

Brokers were able to steer orders to buy and sell stocks, even those listed on NYSE, away from their home exchange on a day when concerns about China's economy and Greece contributed to a 1.7 percent drop in the Standard & Poor's 500 Index, the second-biggest decline since March.

The disruption underscored how quickly the calm can be broken in the U.S. stock market, where about $270 billion worth of stocks trade hands each day. Order has occasionally broken down in a system that is spread among 11 different exchanges and dozens of private venues.

"Today is a good reminder on the number of diverse venues out there, which has frustrated traders for a while," said Craig Viani, vice president at Greenwich Associates in Stamford, Connecticut. "There are a lot of people out there who long for a consolidated market view, but the byproduct of fragmentation is that it does strengthen market stability."

Too many

Eleven exchanges are too many for Themis Trading LLC's Joe Saluzzi. They exist not to serve individual investors but to make it possible for high-frequency traders to do battle with each other by sniffing out price discrepancies, he said.

"Those are the extra fragmentations you don't need and are using it just for arbitraging," Saluzzi said. "You can have three exchanges and you can aggregate liquidity better and get rid of the fragmentation issue. I'd still argue that fragmentation is a bad thing."

To market watchers like Jaret Seiberg of Guggenheim Securities LLC, nothing that happened Wednesday hurt his confidence in the market's integrity.

Fragmentation "means there is still robust trading even when a major exchange experiences a technical glitch," Seiberg, an analyst at Guggenheim, wrote in a note to clients on Wednesday. "This is negative for those who complain that market fragmentation is hurting liquidity and small investors."

–With assistance from Eric Lam in Toronto and Sam Mamudi, Matthew Leising, Stephanie Ruhle and Felice Maranz in New York.

Copyright 2018 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.