As U.S. equity markets opened and resumed trading last
Wednesday, the impact of Superstorm Sandy began to dissipate.
Opening auctions ran smoothly. Trading volumes were high, but
not unusually so. Share-price volatility was normal. Behind
closed doors, however, U.S. exchange operators were still
discussing the market-structure issues revealed by the massive
storm, which halted trading in U.S. equities for two days
the longest weather-related closure since the blizzard
Although the decision to shutter the market was reached by
industrywide consensus late on Sunday night, before the storm
hit, the responsibility for the shutdown was not shared equally
among U.S. exchange operators. Nasdaq OMX, which operates fully
electronic trading platforms, had been ready to open on Monday.
BATS Global Markets, which also operates electronically
and is headquartered in Lenexa, Kansas was prepared to
open its electronic exchanges for trading on Monday, too. But
NYSE Euronext, the operator of the much-vaunted New York Stock
Exchange, hesitated to open its floor-trading operation on Wall
Street and risk endangering staff.
NYSE did have a business continuity plan in place, which it
fully intended to set in motion on Monday. The plan, according
to Joe Mecane, head of U.S. equities for NYSE Euronext, was to
close the trading floor and operate exclusively on Arca, the
exchange operators electronic trading platform. Almost as
soon as NYSE announced its plan to its member firms, however,
the pushback came hard and fast, say industry sources. The
proposed switch apparently caught some broker-dealers by
surprise and would have required them to send their own
programmers into the city to reconfigure order-routing software
on Sunday night, even as the winds rose and the subway system
closed a prospect that caused considerable alarm.
I think the fear came from two things, says
Mecane. The fact that this was the first time NYSE would
be implementing its electronic-only disaster recovery plan in a
live production environment and the fact that people realized
that wed made a decision that it was not advisable to
send people into downtown Manhattan.
Faced with open revolt by some of its member firms on Sunday
evening, NYSE in conjunction with the broader exchange
community decided that the potential threat of opening
to disorderly, volatile trading on Monday was simply too great.
Part of the difficulty, say market experts who were privy to
the discussions, was that so many broker-dealers were
unprepared for the change of venue and worried about their
ability to connect and participate in opening stock-price
auctions. NYSEs rivals were not entirely confident that
the opening auctions would run smoothly on Arca, either, and
after a summer of technological mishaps and trading
glitches were reluctant to risk any hint of structural
disorder. With the industrys reputation in mind, even
NYSEs fiercest competitors, Nasdaq and BATS, agreed to
the Monday closure.