Markets and trading firms are positioned to quickly get back to business after a major terrorist attack.
September 5, 2002
NEW YORK -- With new safeguards and backup systems, Wall Street is confident it could resume trading much more quickly after any kind of repeat of last year's terrorist attacks.
The Sept. 11 destruction of the World Trade Center shuttered the markets for four trading days. Even as trading resumed, with the World Trade Center wreckage still burning, the investment community was working on contingencies for future attacks or catastrophes.
The New York Stock Exchange established an alternative trading floor, while investment firms created new emergency centers, some of them outside of New York City or even the state.
"The industry is in a dramatically better position post 9-11," said Robert Britz, co-president of the NYSE.
Rick Ketchum, president of the Nasdaq Stock Market, said trading firms "across the board have significantly improved their backup."
Companies are reluctant to disclose any details of their efforts.
But the goal was to create a fallback system capable of resuming trading within a day.
New York consulting company Kroll Inc., which specializes in risk management and security, said financial firms have been busy establishing backup offices that are fully equipped to handle customers' orders.
The NYSE's efforts have included spending $20-million on an alternate trading floor in New York City, so that the market could reopen the next day if its current building is damaged or destroyed. The Big Board would not disclose the location, but said the site has been successfully tested.
"We all had contingency plans pre-9-11" but no one had envisioned an attack on that scale, Britz said. "Post-9-11 it seems that nothing is unthinkable."
The NYSE and Nasdaq are looking at ways to cooperate on trading each other's stocks in the event of an emergency.
Verizon, the provider of local phone and other telecommunications services in New York, diversified its telephone network. Fewer of the phone lines used by brokerages and investment houses are routed through the Financial District center, which was destroyed in the attacks and has been rebuilt.
One Verizon official said emergency plans now are "almost an obsession" for companies in New York as well as across the country.
"We design networks with every disaster imaginable. But before 9-11 that scope wasn't imaginable. Now it is," said Eric Bruno, a vice president for Verizon's Enterprise Solution Group.
If the markets can reopen quickly after an attack, the decision may come down to whether they should or not, to avert panicked selling.
But Ketchum said, "People will panic less if they know they can sell their shares. I think, generally, if the markets are able to function fully and efficiently it is better to have them open than not, even if it has a significant downside impact."
Some experts think the delay in resuming trading after last year's attacks wasn't all bad.
"It provided time for people to settle down," said Alan Ackerman, executive vice president of the brokerage house Fahnestock & Co.
While the market dropped spectacularly when trading resumed, there may have been an even worse selloff if stocks traded the very next day, he said.
The Dow Jones Industrial Average fell 1,369.70, or 14.3 percent, in the first week of trading after the attacks. The Nasdaq composite index sank 16.1 percent; the Standard & Poor's 500 index, 11.6 percent.
While Ketchum favors keeping markets open, he sets one condition: that all participants can access them and all stock exchanges are able to operate.
That was not the case after Sept. 11. The NYSE, with its trading floor just blocks from the World Trade Center site, was not damaged in the attacks but external infrastructure problems, namely downed phone lines, made it impossible for trading to immediately resume.
Member firms and the NYSE had to re-establish the connections between the floor and trading desks that in some cases had to be relocated.
The computerized Nasdaq, with two technical centers outside the state, could have continued trading right after the attacks, but the same logistical problems kept some of its member firms from trading.
On Wall Street, the contingency plans are an attempt to restore investors' confidence in a market that also is trying to shake off a bear market that is going on its third year.
It has long been said that Wall Street hates uncertainty. And, worries of future attacks have accounted for some of the market's decline.
"We can't rule out the possibility of another shock," Fahnestock's Ackerman said. "We need to be prepared."