Bloomberg News

Niederauer Says NYSE Open Was Smooth as Closure Ends

October 31, 2012

NYSE Floor Traders Struggling With Internet, Cell-Phone Service

The floor of the New York Stock Exchange is empty of traders, on Oct. 29, 2012, in New York. Photographer: Richard Drew/AP Photo

The New York Stock Exchange opened on time by running on backup power from generators following the longest weather-related shutdown in more than a century. Brokers on the NYSE floor experienced limited Internet and mobile-phone connections while still being able to trade from the exchange.

Trading went “very smoothly, everything opened fairly quickly,” Duncan Niederauer, the chief executive officer of NYSE Euronext, said in an interview with Bloomberg Television’s Matt Miller. “Participation has been a lot more active than we thought,” he said. “For some it was business as usual, for some they were using their backup site.”

NYSE Euronext, on backup power after Hurricane Sandy flooded parts of Lower Manhattan and cut electricity, announced yesterday that trading would resume. It planned to operate the floor with at least 100 designated market makers and floor personnel, Larry Leibowitz, the chief operating officer, said in a phone interview yesterday. The exchange will run on backup power tomorrow and the next day, Niederauer said.

The Dow Jones Industrial Average closed at 13,096.46 today, down 0.1 percent, with all 30 constituents showing opening prices within two minutes of the start. The Standard & Poor’s 500 Index (SPX) ended little changed at 1,412.16.

Worst Scenario

“There is some sigh of relief to see that the worst scenario didn’t unfold,” Eric Teal, chief investment officer at First Citizens Bancshares Inc., which manages $4.5 billion in Raleigh, North Carolina, said in a phone interview.

Volume across markets was 6.31 billion shares, or 5.7 percent above the three-month average.

“The exchange did an extraordinary job in unbelievably severe conditions to get the floor up and running,” Doug Cifu, president and chief operating officer of market-maker Virtu Financial LLC, which represents NYSE and NYSE MTK companies on the Big Board’s floor, said in a phone interview. “We’re fulfilling our quoting obligations and are very, very happy the markets are back to normal.”

Virtu has had no systems, trading or connectivity problems on NYSE’s floor, Cifu said. NYSE kept the New York-based company informed of plans to open the market through as many as half a dozen conference calls a day, he said. The biggest concern Virtu’s designated market makers faced was where they’d park in lower Manhattan, and the exchange arranged for that, he said.

Mary Schapiro

“I am pleased that the nation’s securities markets were able to open today despite the devastation left in the wake of Hurricane Sandy,” Securities and Exchange Commission Chairman Mary Schapiro said in a statement. “Since the weekend, the staff of the SEC and I have been in constant communication with the exchanges, market participants and other regulators assessing the situation and coordinating with the relevant parties.”

The SEC will monitor developments over the next few days, she said.

While Ben Willis, a managing director with Albert Fried & Co., said Internet and mobile phone services were limited for traders on the floor of the exchange today, those buying and selling Big Board stocks had access to the NYSE’s broker booth support system and landline telephones, said Jonathan Corpina, senior managing partner at Meridian Equity Partners Inc.

Extra Step

“There are two ways clients send orders to the floor,” Corpina said. “One is through the exchange network, BBSS, and that is fully functioning,” Corpina said. “The other is the order management system, which is connected to the outside world via the Internet. So for those, clients have been calling us with orders that we are able to generate electronically and trade them on the internal NYSE network. It’s just adding one extra step.”

Rosenblatt Securities Inc. traded from the NYSE floor and off exchange, according to Joe Gawronski, president and CEO.

“We have connectivity to all markets from both the floor and our upstairs desk,” he said in an e-mail. “BBSS, the basic order entry system, is available floor-wide, and we have some phone lines available so we are operational on the floor. Our upstairs desk is based at 20 Broad and there is no power in that building, so those upstairs guys are working remotely.”

Tests Run

The exchange tested connectivity with “literally every market participant in the last 36 hours,” Niederauer said. “We have a generator and we have plenty of fuel in that generator,” Niederauer said about the power needed to run NYSE’s trading floor in Manhattan. “We could run permanently on the generator if we had to, and Con Ed is telling us that we should be back in business hopefully no later than Monday.”

NYSE Euronext shut its markets across every asset class Oct. 29 and Oct. 30, the first consecutive closures because of weather since 1888, as the storm barreled into New York City. Nasdaq OMX Group Inc. and all other U.S. equity markets also shut down as customers coped with preparations for the storm. They had planned as recently as Oct. 26 to open for normal business this week before forecasts for Sandy got worse.

After a series of discussions between exchange officials, market makers, the SEC and other participants, the industry said at about 11 p.m. Oct. 28 that all markets would be closed the next day.

“In hindsight the industry made the right decision collectively,” Niederauer said. “Being open either physically or electronically the past two days would have been a very bad decision because of the number of people in the market that had to be mobilized to get to where they had to get to interact with that market were it to be open.”

Alerted Traders

The exchange alerted traders in an 8:38 a.m. advisory that the NYSE and NYSE MKT would open for trading at 9:30 a.m. and customers using a floor broker were “urged to verify there is a broker present prior to routing to any orders.”

The securities industry made the “proper decision” to close trading this week, Robert Greifeld, chief executive officer of Nasdaq OMX, said in an interview on Bloomberg Television’s “Street Smart” with Dominic Chu. Still, trading firms and exchanges need to be ready to operate during disruptive or catastrophic events in the New York area, he said.

“We cannot be locked into this geography,” Greifeld said. “We have to make sure our computer systems are outside of town and we get our people outside of town.”

To contact the reporters on this story: Nina Mehta in New York at nmehta24@bloomberg.net; Whitney Kisling in New York at wkisling@bloomberg.net

To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net


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