Sandy revolt leads to New York Stock Exchange closure
Plan to use electronic-only trading on NYSE for first time abandoned after revolt by companies
At 6.30pm on Sunday night, with Hurricane Sandy bearing down on the US east coast, New York Stock Exchange operator NYSE Euronext had more immediate problems - a revolt from the trading firms that are its lifeblood.
NYSE officials, including global head of sales Christine Sandler, told the firms that while the exchange would shut down its physical trading floor it was planning to open for business on Monday as an electronic-only trading venue for the first time.
But dealers trading shares were sceptical, according to interviews with about a dozen people privy to discussions including senior exchange officials, Wall Street executives, traders and other sources.
The final choice after more than two days of discussions came down to whether to use an unproven system to keep the markets open while risking employees' safety, or close for the day and play it safe.
If the NYSE had opened for business its electronic systems may have had to handle more than double the volume it had averaged in recent weeks, a prospect that worried market participants already reeling from a series of embarrassing market mix-ups this year.
The firms also did not want their employees to have to report to work in the middle of the worst storm to hit New York since at least 1938. "It was, 'Please don't do this. The market is not ready,'" one of the sources said.
Late on Sunday night, the NYSE and other exchanges finally decided to close the market on Monday, the first time the Big Board had done so for bad weather since Hurricane Gloria in 1985.
While the NYSE took the lead in closing trading in stocks and options, the final decision was collectively taken by all the exchanges, including Nasdaq OMX and CME Group.
In the end, most market participants agreed that NYSE, other exchanges and regulators made the right call, but many on Wall Street still griped about how long it took to reach that decision.
The fact that such a choice took a series of long, complicated discussions signals the enormity of what was at stake. In the event, the storm caused extensive power outages to many areas, including Lower Manhattan, home to Wall Street and the exchange.
As the trading closure extended into yesterday and possibly beyond, analysts estimated that exchanges and banks were losing tens of millions of dollars in revenue every day.
Numerous companies postponed earnings announcements and plans of at least six firms to go public were disrupted.
The NYSE is the largest stock exchange in the United States, responsible for more than 25 per cent of US equity trading volume, and had the biggest voice in the talks.
All this was playing out against a backdrop of technical problems this year, including Nasdaq's inability to process Facebook orders fast enough when the social media company was going public and Knight Capital Group's near collapse due to a trading glitch that cost it US$461 million.
Exchange officials insisted that their decision to shut down the market was ultimately led by concerns about the safety of the financial community.
"This is not the time to be thinking about your own pocketbook. First you think about what is best for the markets," an exchange official said.