By Dow Jones Business News, March 08, 2013, 04:05:00 PM EDT
The New York Stock Exchange is revamping its disaster recovery plan in the wake of superstorm Sandy to allow the Big
Board to manage the opening and closing of stock markets even if its iconic trading floor is shut, according to people
involved in the effort.
The new plan is not intended to supplant the Big Board's trading floor, though activation of any of the NYSE's backup
procedures would mark the first time that the 221-year-old exchange would rely on computer systems to shepherd
securities to market without the oversight of human traders.
As Sandy approached in late October, exchange executives and brokers ultimately agreed on closing markets to minimize
risks for their workers, but the episode raised questions around the financial sector's ability to handle the next
The initial plan being prepared by parent NYSE Euronext ( NYX ) involves keeping the New York Stock Exchange and the
smaller NYSE MKT exchange closed in the event of a storm or other disaster that renders the company's downtown Manhattan
location inoperable or inaccessible.
Trading in Big Board-listed stocks and exchange-traded funds would happen on NYSE's all-electronic Arca exchange,
according to people involved in the planning.
This shift would make Arca the "primary" market, responsible for setting opening and closing prices for stocks, a
critical part in the calculation of indexes and fund valuations.
The proposal would replace NYSE's existing backup procedure, which involves keeping the NYSE and MKT stock exchanges
open in a limited capacity while bouncing "buy" and "sell" orders over to be filled at Arca.
Though that plan has been on NYSE's books since 2009, it was never activated. The prospect of relying on an unfamiliar
method to open U.S. stock trading as Sandy approached drew protests from banks and brokerages, many of which had never
tested the procedures.
NYSE is still finalizing details of its new plan, to be submitted to the Securities and Exchange Commission, according
to people close to the discussions.
While shifting to the Arca platform provides an interim solution, NYSE is developing new technology that eventually
will allow firms to open and close Big Board-listed stocks electronically, without the physical presence of the
approximately 100 staff required to operate the exchange floor.
Officials with some of the Wall Street banks that were uncomfortable with the NYSE's existing plan have generally
backed the new one, describing it as a simpler method, according to people involved in the talks.
Write to Jacob Bunge at firstname.lastname@example.org
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