U.S. Stock Exchanges Study Irene Damage as Brokers Anticipate Regular Open
The biggest U.S. exchanges and federal regulators were assessing damage as Tropical Storm Irene passed over New York City, while brokerage executives said they expected markets to open tomorrow.
Irene struck New York City with winds of 65 miles (105 kilometers) an hour, the National Hurricane Center said in a special advisory at 9 a.m. local time. A storm surge of 3.8 feet was reported at New York Harbor, while total water levels near 8.6 feet, or moderate-stage flooding, were reported at Battery Park City in lower Manhattan, the hurricane center said.
NYSE Euronext and Nasdaq OMX Group Inc. (NDAQ), the two biggest operators of U.S. stock exchanges, said yesterday they were prepared to open as Irene threatened the first market shutdown due to weather since 1985. While fallen power lines and winds cut power to more than 340,000 customers on Long Island, brokerage executives anticipated reporting for work.
“I think the exchanges will definitely be open because the storm was downgraded,” said Brian Pfeffer, chief operating officer at Direct Access Partners LLC, a New York-based brokerage with about 20 employees that work on the NYSE trading floor. “It wasn’t as bad as expected,” he said in a phone interview today. “I don’t see a problem with trading tomorrow at all.”
Direct Access tested systems last night and was told by the management company that its office building where 60 more employees work, 40 Wall Street, would be open, Pfeffer said. He expects to drive to work tomorrow from Manalapan, New Jersey, or take a ferry if the Holland Tunnel isn’t operating normally.
Eric Noll, an executive vice president for transaction services at Nasdaq OMX, said yesterday that a decision on whether to open exchanges Aug. 29 isn’t likely until midday in New York, following an assessment of conditions today. Noll said the decision to open will be made jointly by markets and the SEC.
“As for Monday, my plans are to leave around 3 a.m. to be sure to get in early and check with NYSE and our systems people,” Doreen Mogavero, chief executive officer of Mogavero Lee & Co., who trades on the NYSE floor, said in an e-mail today. “As long as systems are good and phone lines are up it should be business as usual.”
The Securities and Exchange Commission planned to stay in contact with exchanges over the weekend on the status of markets, John Nester, a spokesman, said on Aug. 26.
“Discussions will continue Saturday and Sunday as appropriate,” he said in a statement. “The markets will make the decision whether to open in consultation with the SEC.”
Consolidated Edison Inc., New York’s electric power supplier, said Manhattan was “lightly affected” by Irene.
“We’re pretty certain we’re going to open on Monday,” Noll said in a phone interview yesterday. “It will be a coordinated effort between us and the other markets and the SEC. It’s in none of our interest to have a non-coordinated open. To the extent we all agree we can be functional on Monday morning and the SEC is prepared to open, we are prepared to open.”
The storm forced New York Governor Andrew Cuomo to shut New York City’s transportation system and prompted Mayor Michael Bloomberg, the owner of Bloomberg News parent Bloomberg LP, to evacuate low-lying areas.
While the public face of U.S. equity trading is the New York Stock Exchange in Manhattan, about 13 percent of the nation’s volume took place on that venue in the past year. The rest is handled electronically, with orders matched in data centers in New Jersey and elsewhere.
Getting to Work
Louis Pastina, an NYSE Euronext (NYX) executive, said Aug. 26 that opening a day after the storm may depend on whether traders could get to work in Manhattan.
“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,” Pastina, a senior vice president for NYSE Euronext, said in a Bloomberg Television interview yesterday.
NYSE Euronext said yesterday in an e-mail to customers that it has completed preparations for the storm at its Manhattan headquarters and its data centers.
Hurricane Gloria, on Sept. 27, 1985, was the last time weather shut U.S. equities markets for an entire day. On Jan. 8, 1996, the New York Stock Exchange opened late and closed early after a snowstorm dumped 22 inches (55.9 centimeters) of snow on the city by dawn.
Stock trading stopped for four days after the Sept. 11, 2001, terrorist attacks on the World Trade Center in Manhattan. The most recent shutdown was on Jan. 2, 2007, to observe a national day of mourning for former President Gerald R. Ford, who died on Dec. 26, 2006.
“Post 9/11, we and other markets spent a great deal of time getting ready and building emergency disaster recovery-type functionality,” Noll said. Nasdaq OMX’s two disaster recovery sites “have ample sources of electricity, both public, generator and battery,” he said. “We can operate the markets fully without power for many days and are prepared to do so.”
Noll said key personnel were moved to the company’s two disaster recovery sites today as a precaution.
U.S. stock and option exchanges have held conference calls over the last few days among themselves, the SEC, the Financial Industry Regulatory Authority and the Depository Trust and Clearing Corp. about the likely impact of Hurricane Irene and whether the markets could operate, Noll said. Finra, based in Washington, oversees more than 4,500 brokers, while DTCC clears and settles stocks, corporate and municipal bonds, government and mortgage-backed debt and other products.
“It’s very unlikely we’ll have a situation on Monday where only some markets would open,” Noll said. “Even though there are public transportation issues in Manhattan and there’s a chance lower Manhattan may be closed, that doesn’t necessarily mean the markets won’t open on Monday,” Noll said. “They’d operate remotely.”
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