The reputation of the New York Stock Exchange will suffer because it failed to have a backup facility to deal with Hurricane Sandy, Arthur Levitt, former chairman of the U.S. Securities & Exchange Commission said Tuesday in a radio interview.
The exchange said the chairman did not contact it to find out what its plan was and that he was irresponsibly wrong in making his on-air comments.
People look to the New York Stock Exchange as being the symbol of American capitalism, and to see the exchange go down for two days without an adequate backup plan is very, very unfortunate, Levitt said on a Bloomberg Radio interview. To see the New York Stock Exchange crippled is a body blow that will really shake the image of that institution for a long time to come.
NYSE Euronext closed its markets across Monday and Tuesday, the first consecutive days because of weather since 1888, as Sandy barreled into New York City. All other national exchanges, which also have backup facilities and plans, also closed.
Mr. Levitt is appallingly and irresponsibly wrong, said Robert Rendine, a spokesman for NYSE Euronext. Our back-up plan to trade on a fully electronic basis was ready to be implemented.
However, given the impending storm, it was increasingly clear that it would be extremely difficult to ensure the safety of our respective employees, and the entire industry decided it was best to close the markets, he said in an e-mailed statement today.
No U.S. exchanges actually operate in lower Manhattan any longer, even though the New York Stock Exchange maintains a trading floor at 11 Wall Street.
The data centers that house their operations are all across the Hudson River, in Carteret (Nasdaq), Mahwah (NYSE), Secaucus (Direct Edge) and Weehawken (BATS), N.J.
Nasdaqs backup facility is in Ashburn, Va. BATS is in Nutley, N.J. Direct Edges is in Clifton, N.J.
NYSE Euronexts $250 million Mahwah data center, which opened in 2010, was unaffected by the storm, Rendine.
The facility is built to withstand hurricane weather and has back-up power generation on site that can run for a week before needing more fuel.
The exchange operator also has a backup facility in the Midwest, Rendine said.
Mr. Levitt is entitled to his views -- but even from the armchair of retirement you need to have your facts straight, Rendine said.
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 its trading floor at the stock exchanges headquarters in lower Manhattan and use its Arca exchange, a fully 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. New York time that night that all markets would be shut on Oct. 29.
The NYSEs 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.
If youre going to have a stock exchange, it should have a backup facility of some sort so that regional events dont cause its closure, said Levitt, who is a Bloomberg LP board member and an adviser to Goldman Sachs Group Inc. This should not happen to the worlds most prominent exchange.
Levitt was the chairman of the Securities and Exchange Commission from 1993 to 2001.