Today's Top Stories Also Noted: Spotlight On... JPMorgan sues London Whale boss News From the Fierce Network:
Today's Top News1. Sandy's Aftermath: The view from the NYSE
Given that the New York Stock Exchange's main data center is in Mahwah, New Jersey, close to many other data centers critical to financial firms, there has been a lot of angst--and confusion--about how the exchange's systems are holding up in the after math of Sandy. CEO Duncan Niederauer sought to reassure the trading community that all of its systems were working well. "We spent most of the morning trying to solve" the connectivity issues, and "that's all working smoothly. We've got over 100 million shares of volume already so I think we are moving along pretty good," said Niederauer in an interview with FOX Business. "I don't freak out about anything," he said, adding that the "overwhelming majority of our orders come from outside the building in the Mahwah data center" where they have "full power," but that "the very small part of the orders we get from inside of the building, we had issues with phone connectivity and internet service this morning. We gave them their own phone lines so they could get incoming calls and make outgoing calls. Latest I am hearing is it's not a problem so no, no one was freaking out. Don't worry." All in all, you can't fault the main exchanges for their business continuity efforts or for their decision to close the markets even though they had the technical capability to keep them running. Just because you can doesn't mean you should. As of right now, the exchanges seem to have weathered events well, though some members, like Knight Capital, are struggling with continuity issues. For more: Related articles: Read more about: Sandy, NYSE
2. More second guessing back up plans on Sandy
Recall that as hurricane Sandy bore down on the New York City area, NYSE Euronext initially said that it would close its floor but leave its ARCA system open for trading. Later, it decided that it would shut down all together, along with other exchanges. That seemed like a reasonable move, given the severity of the storm. But Fortune takes a look at the situation, noting that "trading experts seem convinced that the market could have functioned normally with the actual exchange closed on Monday," especially when you consider that many firms had their debt traders report for duty. "When creating a list for contingency planning, you have to think that at least one of those Harvard MBAs would have thought to include hurricanes. What's more, market technology experts say that a number of Wall Street firms have the capacity to allow their traders to buy and sell stocks over the firm's networks from home. Another data point: The NYSE's head of stock trading execution is based in Chicago. So even on a clear day he's not in New York, and on most days that seems to work out fine." It may be that the exchange was bowing to pressure from others, but all in all, it may have lost an opportunity to prove that it's redundancy and back up plans had left it unshakable even in a storm like Sandy. "The NYSE was willing to make the bet that proving it could operate fully electronically would be a better boon for its business than maintaining the mystique that the floor gives it some advantage. Other Wall Street's power players and regulators weren't willing to make that bet." For more:
Read more about: exchanges, Sandy 3. Arthur Levitt levies criticism of exchange shutdowns
The decision by NYSE Euronext, Nasdaq and other exchanges to shut trading during the storm did not sit well with former SEC chairman Arthur Levitt, who levied some pointed criticism at the NYSE in particular on Bloomberg radio. "People look to the New York Stock Exchange as being the symbol of American capitalism, and to see the exchange go down for two days without an adequate backup plan is very, very unfortunate," Levitt was quoted. "To see the New York Stock Exchange crippled is a body blow that will really shake the image of that institution for a long time to come." He also said that, "If you're going to have a stock exchange, it should have a backup facility of some sort so that regional events don't cause its closure. This should not happen to the world's most prominent exchange." The NYSE hit back noting that the decision was made so as not to endanger employees, not because of a lack of back up. The NYSE did have a back up facility in place and ready to go. Indeed, the NYSE Euronext's data center in Mahwah, New Jersey the real exchange center, was not direly affected by Sandy. And the Nasdaq has a back up facility in Ashburn, Virginia. What Levitt seems to be saying is that the NYSE and others should have kept to those plans, allowing trading to take go on, despite the "regional" event. It's hard to say that the exchange's reputation has been dealt a body blow. Even though the exchange might have made a powerful statement as to the prowess of their electronic trading capabilities, the potential for loss of life has to come first. No one really doubts that the exchange has now become a floorless, electronic marketplace. For more: Read more about: Electronic Exchanges, NYSE 4. Wall Street to re-open amid great nervousness
After shutting down its trading infrastructure for two days of flooding and storm, Wall Street will bring its trading systems back on line today, even though much of lower Manhattan remains underwater. Trading platforms are nevertheless primed to resume operations. The exchanges and their members want to be operational as soon as possible, but a fast reboot might result in more problems and glitches. It remains to be see if there was any real damage to the vast, complicated trading system, which hasn't been shut down for two consecutive days due to weather since 1888. Flooding water apparently came within just two blocks of the exchange's main building at the corner of Wall and Broad. All the redundancy plans call for testing when bringing systems back on line. All firms have been testing extensively for as long as the weather has allowed. There remains a beehive of activity toward the goal of restarting trading. The NYSE had about four dozen staff members sleeping at its Lower Manhattan headquarters. Sifma says it has been in touch with more than 400 relevant parties through the storm. Fuel for generators have been brought in. There will likely be some glitches, but my bet is that the process goes smoothly. This certainly could be the industry's vast IT network's finest hour. It would represent a strong answer to the many questions raised by the technical snafus that have snarled trading as of late, such as the Knight Capital and Facebook IPO fiascoes. For more: Read more about: Sandy, Storm 5. Knight Capital forced to halt orders
Brokerages and banks have long been tasked with developing and testing business continuity plans, and most have taken these tasks extremely seriously. I hope so anyway. But no amount of testing can actually replicate a disaster, so you never know exactly how these plans will turn out. Disaster recovery can never be guaranteed, and Knight Capital is learning this the hard way. The leading market maker has informed clients that they should route all orders to other venues, as Knight's back-up generator has failed, making it unable to make markets, according to Reuters. "All computer interfaces with Knight will be shutdown with no new orders, both by phone or electronic, being accepted at this time," the company said in a statement. The news represents a double whammy of sorts. The company recently lost about $440 million in less than an hour as the result of software glitches related to its efforts to support the NYSE's Retail Liquidity Program. That led to a $390 million loss for the third quarter. So far, it does not appear that other companies have been forced to similarly shut down trading. There was some concerns about Citigroup, given some flooding around some of its buildings. Other large banks may be shifting some trading to desks far from New York. For more: Related articles: Read more about: Knight Capital, Sandy Also NotedSPOTLIGHT ON... JPMorgan sues London Whale boss JPMorgan has made an interesting move, perhaps as a result of its internal investigation into the London Whale "hedging" fiasco that cost it so dearly. Reuters reports the bank has sued the boss of the London Whale, Javier Martin-Artajo, who was Bruno Iksil's immediate supervisor. It's unclear what Martin-Artajo was charged with, as details of the suit were not made available, but the bank has said it will seek to clawback money paid to the main participants in the mishap. Article Company News:
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Thursday, November 1, 2012
| 11.01.12 | Sandy's Aftermath: The view from the NYSE
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