Wall Street back in business

October 30, 2012

The major U.S. stock exchanges plan to reopen Wednesday after Hurricane Sandy forced a two-day shutdown of the market, the first weather-related event to cripple trading for that long a stretch since 1888.

The New York Stock Exchange and the Nasdaq Stock Market announced that trading would resume as usual after consulting with other exchanges, market participants and the Securities and Exchange Commission. In a statement, the NYSE dismissed earlier reports that its exchange floor in storm-torn Manhattan had been damaged.

“Our building and systems were not damaged and our people have been working diligently to ensure that we have a smooth opening,” Duncan Niederauer, chief executive of NYSE Euronext, said in a statement.

The decision to shut down trading was primarily driven by fear for the safety of the workers at the various exchanges and trading firms. But there also were logistics to consider, people involved in the discussions said. It was unclear whether the firms that buy, sell and route orders could function. Having the exchanges operate would have been like opening a store knowing that there would be no customers.

On Sunday, as the storm approached, the NYSE considered resorting to fully automated trading Monday using its sister exchange, Arca. But many in the trading community said they weren’t ready to reprogram their systems for Arca, a person familiar with the talks said. The NYSE and other exchanges decided to shut down completely.

Since then, the exchanges have been involved in back-to-back calls with the industry and federal regulators to assess their options. By noon Tuesday, there was broad consensus that the industry had enough backup sites and connectivity to get the market up and running Wednesday, even though conditions remain far from perfect.

The NYSE is coordinating car pools for essential staff, but poor road conditions and closed tunnels could hamper the commutes of employees at trading firms and other market participants and test their ability to work remotely.

A weather-related closing of this duration has only taken place once before, when the blizzard of 1888 hit the East Coast. The longest closure in modern times occurred in 2001, when the markets shut down for a four-day stretch after the Sept. 11 terrorist attack.

The SEC and Treasury Department said they supported the decision to resume trading. Meanwhile, the Securities Industry and Financial Markets Association, which represents hundreds of securities firms and asset managers, suggested that its member firms start trading again.

People involved in the decision to reopen the exchanges said there was a strong bias toward getting the markets up and running and demonstrating that this critical part of the national infrastructure can recover quickly.

In addition, most mutual funds usually assess their performance at the end of every month, adding more urgency to reopening the markets Wednesday, some industry observers said. Mutual funds also try to finalize their trading for the year on Oct. 31, said Jamie Cox, managing partner at Harris Financial Group.

Dina ElBoghdady covers housing policy for The Washington Post.
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