Summary: GAO reviewed the automated order routing and execution systems and operations at the American Stock Exchange, National Association of Securities Dealers (NASD), New York Stock Exchange, Midwest Stock Exchange, Pacific Stock Exchange, and Philadelphia Stock Exchange to determine whether internal control weaknesses existed.
GAO found that: (1) although the exchanges had controls in place to mitigate many of the risks associated with automation, inadequate system security and internal control weaknesses existed in all of the exchanges except NASD; (2) the lack of adequate controls at the five stock exchanges could impede their ability to maintain continuous service, protect critical computer equipment and operations, and process correct information; (3) at the exchanges where weaknesses existed, officials said that they had taken and planned to take additional steps to improve systemic and operational controls; and (4) stock market officials were concerned that the costs of eliminating certain weaknesses could be prohibitive.
