As Nasdaq commemorates the 20th anniversary of 9/11, we reflect upon how the tragedy transformed the landscape of the financial industry. Nearly 3,000 people lost their lives that day and thousands more were injured as a coordinated terrorist attack hit New York City and Washington D.C., with another plane crashing in Pennsylvania. The attack changed the course of American history forever, but as President George W. Bush said at the time, “Our financial institutions remain strong, and the American economy will be open for business.”
While this despicable act of terror that reshaped the heart of New York’s Financial District will be forever engrained in the nation’s memory, it was a catalyst for change. The financial industry was forced to reckon with the tragedy and take actions to be prepared for future unprecedented events, including the coronavirus pandemic. With a critical emphasis on risk management, business continuity planning and robust technology, the industry became increasingly more resilient, withstanding the economic shocks and events that followed in the decades since, fueling the strength and endurance of the U.S. economy.
“After 9/11, the entire financial industry came to the view that we had to change the resiliency of the industry. It was really on the back of a physical issue, but our risk-management team really came together and has been driving business-continuity planning with every kind of scenario,” Nasdaq President and Chief Executive Officer Adena Friedman told Barron’s earlier this year. “Today, [amid the coronavirus pandemic,] you’re seeing the financial markets and the financial industry really being able to operate and provide capital liquidity and the technology and the infrastructure to support the markets in an unprecedented time and still maintain the safety of their people.”
At the time when the Twin Towers of the World Trade Center complex fell, Nasdaq’s former headquarters, One Liberty Plaza, was located across the street. After the first plane hit, security guards began evacuating staff, “so most of our people were on the ground when the second plane hit,” noted Nasdaq’s former Chief Information Officer Gregor Bailar. In the following hours, Bailar, along with the rest of his team, decided to take the extraordinary action of shutting down the market. “We’ve never done that in the securities market, period,” he recalled.
In the wake of the Tuesday morning tragedy, the telecom and infrastructure of downtown New York were in shambles, and access to businesses in the area wasn’t available. As a result, the markets remained closed for the rest of the week as traders worked to get back online, finally reopening the following Monday. The loss of almost 3,000 lives, physical capital and infrastructure temporarily reduced New York City’s productive capacity; however, the attack’s effects on employment and consumer confidence were relatively short-lived, having largely run their course by mid-2002, according to research by the Federal Reserve Bank of New York.
“Since then, all of the market participants and market infrastructure providers have done a lot of work to make sure that they can manage the markets remotely. They’ve become fully electronic markets in that time, and the market participants have gone through extremely intensive business-continuity planning,” Friedman said in her Bloomberg interview.
As the industry refocused its efforts around resiliency, Friedman noted that Nasdaq does “lots of emergency planning scenarios,” adding that the company is in a constant business-continuity planning mode. Nasdaq continuously tests its systems and technology to ensure they have the capacity to handle record volume and activity at any time, from anywhere.
“You can learn from the past crises to understand the best way to react to them,” Friedman said at a Washington Post Live event in May 2020. “When you look back to 9/11, I think that you saw that the infrastructure of the financial industry was very dependent upon people being in New York, in their offices. And since then, the financial industry has invested a lot of money, time and effort to make sure that we have full remote capabilities.”
Those lessons and efforts to enhance resiliency proved to be essential during the ongoing coronavirus pandemic, as Nasdaq has managed to carry on with business operations despite the majority of its workforce having to work remotely. Even amid record volume and volatility in the markets, the systems supporting the options and equities markets performed well, according to Tal Cohen, executive vice president and head of North American Markets at Nasdaq.
“In our DNA –and it’s been part of the DNA for a long time now – has been this concept of a virtual environment and working from home,” Cohen said in a 2020 interview with Shane Swanson, senior analyst at Coalition Greenwich. “The reason we were successful is because we were early in implementing our business continuity plans.”
“Our economy is based on open access to markets, open access to capital, price transparency and the ability for investors to express themselves and manage their wealth in an open environment,” Friedman told Bloomberg. “It is a testament to our economy to demonstrate that we can manage the markets and allow investors to express their sentiment while we’re going through this situation.”
While Friedman believes that there will be lasting effects following the pandemic, “just like there were after 9/11, Hurricane Sandy and the credit crisis,” she acknowledged that we’ve come away from those crises “as a stronger business and a stronger nation,” she said via Twitter. When faced with adversity, the best of America – our people and institutions – rise to the challenge and our resolve only strengthens.
“I just stay focused on our future. We're very fortunate that this business is a very resilient business—we provide software, services, data as well as our markets, and they are all fully operational, and they're all critical services to our clients,” Friedman said during Politico’s Morning Money Virtual Interview with Ben White in April 2020. “We are still making sure we're planning for our future. We're executing on the future vision of the company, and that's how we focus.”
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.