Stock Markets to Reopen After Longest Storm Shutdown Since 1888

Tuesday, 30 Oct 2012 01:37 PM

 

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U.S. equity markets will reopen tomorrow after the longest weather-related shutdown in more than a century, resuming after the New York Stock Exchange was spared by Hurricane Sandy as it swept through New York yesterday.

The decision was announced in statements by NYSE Euronext, Nasdaq OMX Group Inc. and Bats Global Markets Inc. Earlier, NYSE spokesman Robert Rendine said floor and building of the exchange “are fine.” Executives of the biggest U.S. equity venue expect a normal open, according to Eric Ryan, another spokesman.

U.S. exchanges are in the second day of a suspension called to safeguard workers as Sandy barreled up the East Coast, halting public transit and forcing hundreds of thousands of evacuations in New York City. NYSE Euronext’s building on Wall Street is close to the section of Manhattan that was deluged when the storm propelled a 13-foot sea surge last night.

“Everybody is keeping Wednesday in focus as we come into month-end,” Ryan Larson, the Chicago-based head of U.S. equity trading at RBC Global Asset Management (U.S.) Inc., said in a telephone interview. His firm oversees $250 billion. “That will have implications for a variety of factors, which is why the exchanges are working behind the scenes to make sure trading regardless of the conditions is open.”

Leaves, Branches

Streets outside the exchange at 11 Wall Street were strewn with leaves and branches at 10:30 a.m. New York time, with sandbags still stacked two high around the building. Mailboxes and trashcans were overturned at Broad Street and Beaver Street.

Florescent lights were visible on upper floors of the NYSE building. Water had receded from the financial district. Tourists wearing sneakers took pictures amid groups of police and residents walked their dogs around the neoclassic structure, opened in 1903.

The NYSE began testing for a back-up plan that would have been necessary had storm damage prevented it from reopening the floor tomorrow. Had that been the case, NYSE Arca, its electronic market, would be deemed the primary market for NYSE- listed stocks and the Big Board wouldn’t have operated. Firms started to test their systems at 9:30 a.m.

American equity markets were closed yesterday and today, the first consecutive shutdowns because of weather in more than a century. The last comparable closure of the NYSE was on March 12 and 13, 1888, when a blizzard dumped 21 inches of snow on New York, according to the company’s website. The exchange was closed for about 1 1/2 days after a snowstorm in February 1978.

Damage Assessments

New York officials began assessing damage after Sandy killed 10 people, sparked a fire that razed 80 homes in Queens, flooded tunnels of the biggest U.S. transit system and left 750,000 customers without power. Sandy is among the worst storms in New York history, rivaling the blizzards of 1888 and 1947.

Stock markets hadn’t been closed for four days in a row since the start of 2007 when, following a weekend and the New Year’s Day holiday on a Monday, they shut on Jan. 2 to observe a day of mourning for President Gerald Ford’s death.

They closed for four days after the Sept. 11, 2001, terrorist attacks, the longest shutdown since President Franklin Delano Roosevelt declared a bank holiday in March 1933. When markets reopened Sept. 17, the Standard & Poor’s 500 Index plunged 4.9 percent.

Trading on the Chicago Board of Options Exchange and CBOE Futures Exchange is shut today, said CBOE Holdings Inc. in an e- mailed statement. The exchange operator will issue an update if the shutdown lasts longer.

“I’m a little surprised that the exchanges couldn’t secure the technology needed,” Dominic Salvino, a specialist on the CBOE floor for Group One Trading, the primary market maker for VIX options, said in a phone interview. “It seems unreasonable that the nation’s financial markets have to shut down just because everyone has located themselves within five miles of each other in New Jersey.”

Worsening Forecasts

Exchanges had planned as recently as Oct. 26 to open for normal business this week before forecasts for the storm got worse. At about 4 p.m. on Oct. 28, the NYSE announced it would shut the trading floor at its headquarters and use its Arca exchange, an electronic platform, for all transactions. After a series of discussions between exchange officials, market makers, the SEC and other participants, the industry said at about 11 p.m. that night that all markets would be shut on Oct. 29.

“Do you really want to open up the market and have these potential issues right before the election, right before month end?” Matt McCormick, who helps oversee $7.3 billion at Cincinnati-based Bahl & Gaynor Inc., said in a telephone interview. “I’d rather be slow and correct than fast and wrong and really wrong. It’s better to be conservative.”

The NYSE’s plan to switch floor trading to Arca spurred investor concern about potential malfunctions in a market still shaken by recent trading mishaps, including a software error at Knight Capital Group Inc. that almost sent the Jersey City-based market maker into bankruptcy in August.

Nasdaq experienced delays in opening Facebook Inc. in its initial public offering in May, causing losses for some traders who bought more shares than intended. Bats Global Markets Inc. canceled its IPO when it couldn’t get its shares to trade on its own exchange.

© Copyright 2014 Bloomberg News. All rights reserved.

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