NYSE operations protected on many fronts

New York City continues to have high symbolic value for a potential terror attack, with the downtown financial district representing top "iconic value" for terrorists who ultimately would probably like to repeat the stock-markets closure they accomplished Sept. 11, 2001.

But this time around there is a great deal more security around operations of the New York Stock Exchange, including the fact that the NYSE has a second, hidden trading floor to where operations could be seamlessly switched over.

However, in line with Sunday's warning from the Department of Homeland Security that a number of targets, including the NYSE, is at risk of a car or truck bombing by al-Qaida attackers, security has been heightened around the already well-guarded perimeter of the exchange.

Since Sept. 11 existing security at the exchange has included large trucks, sandbagged to make them more immobile, blocking off 11 Wall St. where the exchange is situated. And as a standard measure there was already heavily armed police and security officers throughout the area.

"The safety of our employees, members, and everyone who works in the NYSE facilities is our number one priority and is of the utmost importance to us," said John Thain, chief executive of the NYSE, on Sunday after Homeland Security Secretary Tom Ridge raised the alert levels in Washington and New York.

In a show of confidence that operations were continuing as normal, New York City Mayor Michael Bloomberg rang the opening bell for the NYSE, accompanied by Thain, New York Governor George Pataki and Sen. Charles Schumer, D-NY.

Treasury Secretary John Snow praised those working in the financial sector and sought to reassure investors in a Monday statement.

"Our nation's financial markets, financial institutions and financial sector continue to operate normally. I applaud the financial services industry for remaining open for business in the face of yesterday's reporting," Snow said. "The extraordinary commitment of the men and women who make our financial systems work is invaluable; their work demonstrates the resiliency and strength of our financial system."

After the Sept. 11 terror attacks, the U.S. financial markets were immediately closed because of extensive damage to the surrounding infrastructure of the NYSE, in particular critical phone lines. Also, regulators at the Securities and Exchange Commission, in consultation with financial-market officials, considered it prudent to suspend trading on all markets for five days to prevent panic trading.

When the SEC allowed trading to resume five days later, the Dow Jones industrial average fell 684 points, or 7.1 percent, to 8,920, its biggest-ever one-day point decline.

Looking back at the closure of the markets, the Government Accountability Office (formerly known as the General Accounting Office), the investigative arm of Congress, noted in a March 2003 report that though the exchange building was not damaged, "critical broker-dealers and bank participants had facilities and telecommunications damaged or destroyed."

In the report, entitled "Additional Actions Needed to Better Prepare Critical Financial Market Participants," the GAO added: "These firms and infrastructures providers made heroic and sometimes ad hoc and innovative efforts to restore operations. However, the attacks revealed that many of these organization's business continuity plans had not been designed to address wide-scale events."

Robert Britz, executive vice chairman, president and chief operating officer of the NYSE, testified to Congress in 2003 that the exchange has been implementing increased contingency planning in the event of any kind of attack or other disruption.

"Contingency planning has played a key role at the NYSE for many years. Our plans include redundant, active data centers served by different power grids and multiple telecommunications central offices, with each site sharing daily the processing load generated by the trading of about 1.4 billion shares," Britz told the House Subcommittee on Capital Markets.

"All of our facilities have back-up power generators and uninterruptable power source systems. All of our facilities are interconnected through a diversely routed private fiber optic network that does not pass through any phone company central office," said the NYSE official.

Perhaps the most ambitious of the NYSE's redundancy plans is the entire backup trading floor secreted somewhere in New York City.

"We have a back-up trading floor, developed at a cost of approximately $25 million dollars and 30 person years," Britz said. "This alternative venue would support the trading of all NYSE-listed equity securities, without modifications to the NYSE's market structure model, on a next-day basis should an event disable the primary Trading Floor. Support is provided for both specialists and brokers and a full suite of trading applications."

The backup trading floor is in a borough of New York City, but NYSE officials decline to identify its exact location, for obvious reasons.

Markets finished up Monday with the Dow adding 39.45 points to close at 10,179.16.

(With photos: NYP2004080208, NYP2004080207.)