A big hand goes to everyone involved in opening the markets Wednesday. The updates of market data across my screen masked the round-the-clock effort that went into making this happen against such an impossible backdrop. They also mask the huge amount of work going on to keep the markets open and manage the hiccups and bumps.
A journalist asked me yesterday why this was so difficult – surely it’s just a switchover to another computer on another power grid? What a thought, given the intricate network of activity, the number of firms and connections involved; the testing; the load of traffic messages, quotes, trades, reporting, middle office, back office, book and bank transfers that need to happen. Let alone the people-side of this.
I’ve worked in the financial markets for 28 years and have been through some rough times. I’ve worked at an exchange and held my breath across the opening bell. I get the complexity of this. With the world watching, the importance of opening Wednesday was huge, especially as it’s the end of the month. Kudos are due.
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10 Comments to "Opening the Markets Was a Very Big Deal":
rhealey2
01 November 2012
Agreed Miranda - what will be interesting now is the fallout - we can expend a far bigger spend now on disaster recovery systems and an increased focus by the regulators. One firm was quoted in FT as saying their disaster recovery system had shown itself to be a disaster in itself!
Comments (89)
Anonymous
01 November 2012
Hopefully Arthur Levitt will read this....www.businessweek.com/news/2012-10-30/no-backup-at-nyse-will-shake-image-for-exchange-levitt-says.
His view seems complete out of touch with reality. Even if the exchange could have opened (it's likely that we could have "been open" on Tuesday) it would have put a lot of people in harms way for the sake of opening.
I also agree with rhealey, this will almost undoubtedly cause us to spend a lot more money on back up systems which will almost certainly not make economic sense, and will still have a high probability of failing themselves.
crammond1964
01 November 2012
in 1987 in London the view was to keep markets open to allow any sort of trading as one did not know what tomorrow may bring . I think with screen base mkts I can see no reason why they shut for 2 days ? Perhaps it was just the colocation players were unable to play ?
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Rhino
01 November 2012
Better to be conservative with the US markets open. As well-documented, the markets' complexity is high and I'd rather not see another market event that negatively impacts investors - and everyone in our markets. Arthur Levitt is so out of touch with current market. Not sure he was ever "in-touch" given legacy of Enron and other judgments around trading exemptions he was responsible for.
mmizen
01 November 2012
You're right, there should be a review of business continuity plans and disaster recovery sites, and whether everyone who could have opened should have opened, in whatever state, and how to keep the markets open in our electronic world. And anonymous is right, it'll come at a cost, but if the experts on TV are to be believed, we will see more extreme weather patterns going forwards, whatever the cause.
The Brits may be famed for just carrying on, but 1987 was a different story and we wouldn't jeopardize people either. In 1987 I was a market maker in London. I lived 15 miles west of the office in the City. Many of us didn’t realize there was a hurricane or the implications when we went to bed – we didn’t constantly watch TV and we had no internet. We talk a lot about the weather but watching the forecasts equated to train spotting. I woke to devastation outside my door but no flooding. I climbed over downed power lines (how stupid is that?) and huge tree trunks to cram into a cab with 8 other people to get to work because it didn’t occur to me not to turn up. I couldn't call anyone anyway, there were no phones. So we went to work because we didn't know any different, but the office was running, everything was working and we weren’t flooded. We also had no cell phones, no remote trading, and the highest frequency of trading was as fast as I could type in the prices or yell to the guys on the floor.
Comments (41)
Anonymous
01 November 2012
A serious percentage of trading is done by NY based brokerages and institutions. To say that the markets should open because they are mostly screen based is out of touch with reality - you can't open when such a huge percentage of the market participtants cannot participate. For one, its just not 'fair' to the firms unable to trade, but more importantly, liquidity would have been so out of whack that there would been wild irrational moves, particularly given the possibility for knee-jerk reactions to the hurricane.
ltabb
01 November 2012
There were also power outages all over the place and connectivity issues. While many brokers have back up lines that supposed to be divergent, the problem is unless you are really careful and on your carriers all the time, the carriers swap bandwidth. So what started out with two different carriers over two separate lines can without your knowing become two carriers using the same line. And when that line is cut, or when whole swaths of NJ, NY, and CT are without power - it becomes hard for anyone to trade.
The other issue is that the nyc still has a manual open. And getting folks downtown or anywhere on Monday / Tuesday would have been problematic.
I was also talking with one of the NYSE guys on Tuesday who said that they were thinking of opening electronically over Arca, but the market data would have been all messed up and come out over the wrong data feed - something about going out over tape b instead of tape a. Which he said could have caused even more problems.
So problems with the exchange, problems with market data, problems with investors...better safe than sorry. They made the right call.
Comments (303)
crammond1964
02 November 2012
Had the market been shut for 5 days and had a 5/10% who would of taken the loss ? Thats why the mkt should of opened and as in 1987 the exchange governors were aware of lack of liquidity but insisted on keeping mkts open for that very reason .Larry they made the right call only because we re-opened on Wednesday ; would you of said that if we were still shut now ? A lucky call not a correct one !
Comments (252)
ltabb
02 November 2012
Good question - what if it were like a Katrina issue with the whole city melting down into pandemonium? Thankfully that didn't happen. I would think closing for a day or two is probably fine, Much more than that - probably not. I guess it depends upon if the constituency of folks including investors, brokers, market makers, and exchanges can all open, connect and trade. If they can't then closed is probably better. If they can then open is absolutely better.
However, when there is pandemonium, the market should probably be open. As for Levitt's issue about degrading the symbol of capitalism in America because the markets are closed because a major hurricane hits lower Manhattan - not sure I agree with that.
Comments (303)
lkovach
06 November 2012
Alex Tabb looks more closely at the industry's decision to not enact fail-over plans: "Business Continuity Does Not Equal ‘Interruption-Free’"
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