NYSE Weighs Shutdown Options as Irene Risk Closes Subways
Hurricane Irene, forecast to reach New York this weekend, has the potential to shut down the New York Stock Exchange, a company executive said.
“If we can open here but none of our customers can get to their desks, it really doesn’t make a lot of sense to open the exchange,” Louis Pastina, senior vice president for NYSE Euronext (NYX), said in a Bloomberg Television interview. “We’ll have to gauge that in coordination with the Securities and Exchange Commission, the other stock exchanges and our member firms.”
The company is able to run its electronic platform NYSE Arca even if the hurricane prompts NYSE Euronext to shut the New York Stock Exchange and NYSE Amex, which rely on human traders in Manhattan, Pastina said in a phone interview. New York Governor Andrew Cuomo said the city’s public transportation system will shut down starting at noon tomorrow.
NYSE Euronext, Nasdaq OMX Group Inc., Bats Global Markets and Direct Edge Holdings LLC -- the four biggest U.S. exchange operators -- said they currently plan to open for business on Aug. 29, a day after Irene is forecast to hit New York. CME Group Inc. (CME) said it has no current plans to shut or delay trading on the New York Mercantile Exchange.
While the Nymex trading floor is located in an area New York City Mayor Michael Bloomberg ordered evacuated, the bulk of trading on the platform is electronic. Bloomberg is majority owner of Bloomberg News parent Bloomberg LP.
Irene is a Category 2 storm, down from the Category 3 power it had when it whipped the Bahamas yesterday, and isn’t likely to regain much strength before it crosses North Carolina, said a National Hurricane Center advisory at 11 a.m. Eastern time.
“Our plan is to ring that bell on Monday morning at 9:30,” Pastina said, referring to the signal that trading on NYSE has begun. Regular U.S. stock trading begins at 9:30 a.m. New York time on weekdays.
Should the storm prevent that, NYSE Euronext could still open Arca and use it to run the opening and closing auction process used to set equity prices at the start and end of the day for NYSE and NYSE Amex stocks, Pastina said. Nasdaq Stock Market, NYSE Euronext’s biggest U.S. rival, also uses an electronic auction.
“We have been communicating throughout the day with markets and securities firms on whether the markets will be open Monday,” John Nester, an SEC spokesman, said in a statement. “Discussions will continue Saturday and Sunday as appropriate. The markets will make the decision whether to open in consultation with the SEC.”
“I don’t see how they can open on Monday,” Alan Valdes, director of floor trading at broker DME Securities LLC, said about NYSE in a telephone interview. If public transportation is shut, “people can’t come in to work.”
DME has seven people working on the NYSE floor and almost 20 at the firm’s midtown Manhattan location.
“Brokers are having people come in on Sunday and renting hotel rooms,” Valdes said. “But they may not be able to get into the hotels unless they come on Saturday. I live in Hoboken. If there’s no PATH and ferry, I may not be able to get here.”
Bats Global Markets and Direct Edge, which each operate two U.S. stock exchanges, are monitoring the progress of the Hurricane Irene. Bryan Harkins, chief operating officer at Jersey City, New Jersey-based Direct Edge, said “business continuity procedures” will be implemented if that becomes necessary. Bats is watching the progress of the hurricane while planning “normal operations” for its exchanges on Aug. 29, Stacie Fleming, a spokeswoman, said in an e-mail.
“Nasdaq will continually inspect its and Nasdaq OMX PHLX’s systems and data center facilities all weekend and provide updates as needed to employees and customers,” Joseph Christinat, a spokesman for New York-based Nasdaq OMX Group Inc. (NDAQ), said in a phone interview.
The main computer servers for most venues, including NYSE and those run by Lenexa, Kansas-based Bats Global Markets, operate in northern New Jersey. The computers that match buy and sell orders and maintain records of all quotations are in data centers in Mahwah, Weehawken, Secaucus and Carteret. NYSE and Amex operate hybrid systems with electronic trading and manual trading on the NYSE floor in Lower Manhattan. All exchanges have backup sites to run their markets if the primary location becomes inoperable.
Equinix Inc. (EQIX), which operates data centers used by exchanges and alternative markets including dark pools to house their main computers and trading technology, will have more employees ready to work if the storm affects the operation of its facilities. Dark pools are private venues that compete with exchanges without displaying bids and offers publicly.
“The data centers are built to withstand very, very bad storms,” Steve Smith, chief executive officer of the Redwood City, California-based company, said in an interview in New York. “We’re double-checking our fuel to make sure we have reserves if we lose power,” he said. “We’re double-checking the generators. We’ll have more staff on standby, and on Sunday night and Monday we’ll be on higher alert.”
Backup fuel vendors are also on standby in case additional levels are required, Sam Kapoor, chief operating officer at Equinix, said in an e-mail. All of the company’s data centers are staffed around the clock, he said.
Jonathan Corpina, senior managing partner at Meridian Equity Partners, a broker that operates on NYSE’s trading floor and runs an office around the corner from the exchange, said the firm has different plans in place for different scenarios. Half of the 30-person company works on the NYSE floor.
Going to NYSE
“If our office doesn’t have power but NYSE does, we’ve got preapproval for everybody from our office to come down here to the floor,” Corpina said. Traders will also be located in Westchester, New York, and the western part of Monmouth County in New Jersey in case employees can’t access downtown Manhattan. “If NYSE is deemed inoperable, we’ll have offsite locations with mirrored systems to facilitate clients orders,” he said.
Dan Veru, chief investment officer at Fort Lee, New Jersey- based Palisade Capital Management LLC, which oversees $3.8 billion, said employees will come to work on Aug. 29 if there’s no damage from Hurricane Irene.
“I have a fabulous view of the George Washington bridge,” Veru said in a phone interview. “We have nothing protecting us from the storm. We have a hurricane plan where all our desks are going to be covered with tarps and we’re putting all of our computers and phones away. If this storm is coming, God knows what’s going to happen.”
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