What would happen if the NYSE couldn’t open? What happens to NYSE members and customers? Does the US financial system come to a halt?
These questions are the reason for Business Continuity Planning (BCP). NYSE Euronext and its exchanges have extensive disaster recovery plans that cover a host of business continuity scenarios. In 2011 we had snowstorms that brought New York City to a halt; a powerful hurricane aimed directly at New York City; and, an earthquake in Virginia that was felt all along the eastern seaboard. The NYSE was able to operate business “as usual” but these types of unpredictable events make continuity planning a critical piece of every business’ survival kit.
In a worst-case scenario, what would have happened if the NYSE could not physically open its trading floor due to a snowstorm or hurricane? The answer: the NYSE would implement Rule 49 which allows the NYSE to utilize NYSE Arca, our all-electronic exchange. The trading community would be notified that NYSE Arca becomes the NYSE. What does that mean? Essentially, customers would send orders to NYSE Arca under the NYSE Arca rule set; those orders become quotes published to the Consolidated Tape. The quotes are published as NYSE quotes. Under this plan, NYSE Arca would not trade NYSE-listed issues as itself; instead, any executions would occur under NYSE Arca rules and would be published to the Tape as NYSE executions.
In this scenario, NYSE customers who also are an NYSE Arca member with an NYSE Arca connection would be able to continue to trade. So, it would make sense to have this additional membership and connectivity. NYSE Arca’s all-electronic platform protects it from issues related to a physical trading floor. However, that does not protect it from issues that may impact the main data center in Mahwah, N.J. While that 400,000-square-foot facility is highly fortified, catastrophic conditions could conceivably impact its ability to operate reliably. In those situations, the NYSE Arca trading platform can be switched to a secondary data center, which runs out of Chicago.
So the NYSE has multiple levels of business continuity tools available. In the future, with the addition of the Universal Trading Platform to the New York market, there will be additional capabilities such as the ability to run the NYSE platform as is, but remotely. To do this, the NYSE would provide tools to both Designated Market Makers and trading Floor Brokers so that they can access remotely in times of extreme conditions. In addition, the Chicago facility is being upgraded to add the NYSE as a “backed-up” trading platform. By doing so, the NYSE will be able to handle a situation whereby the trading floor is operating normally but the primary data center is unavailable. In that situation the NYSE will be able to run out of the back-up data center in Chicago too.
Business continuity planning includes concocting scenarios that you hope never materialize, but need to be prepared for, just in case. So while the past year has brought hurricanes, snowstorms and earthquakes, the team is thinking way beyond those now-“everyday” occurrences. So welcome winter!