The U.S. securities industry canceled all equity trading today and will shut bond markets early, moving to protect workers as Hurricane Sandy barreled toward New York City with 85-mile-per-hour winds and the threat of an 10-foot sea surge.
The stock-market shutdown, announced by the Securities and Exchange Commission, may extend through tomorrow. CME Group Inc. said it will close interest-rate trading at noon New York time, in line with with the bond-industry group’s recommendation. Risks posed by the storm, expected to come ashore late today in southern New Jersey and potentially affect 60 million people, were deemed too great to require workers to travel.
“It was a judgment decision based on the safety of a lot of market participants, especially as the storm seems to be getting more severe,” said Larry Leibowitz, chief operating officer of NYSE Euronext, in a phone interview. “Given all the emphasis on stability and investor confidence, operating the market that way didn’t seem to serve the public interest. Why do this? To prove we can? That didn’t seem to make a lot of sense.”
Futures Slip
Trading in U.S. equity-index futures ended at 9:15 a.m. New York time today, CME Group Inc. said in a statement. The Securities Industry and Financial Markets Association recommended trading in dollar-denominated fixed-income securities end at noon. Futures on the Standard & Poor’s 500 Index closed down 0.4 percent at 1,402.4 after sliding as much as 0.8 percent during the session.
CME said in a statement it will accept credit default swap deals until the regular acceptance time of 7:00 p.m. New York time, with settlement curves calculated at noon. For interest rate swaps, CME Group will accept deals up until regular acceptance time of 7:00 p.m. New York time. Non-dollar settlement curves will be derived at their normal times, the derivatives exchange said.
Exchanges from the NYSE and Nasdaq Stock Market to those run by Direct Edge Holdings LLC in Jersey City, New Jersey, and Bats Global Markets Inc. in Lenexa, Kansas, suspended operations. U.S. equity trading is spread across 13 exchanges and dozens of private venues run by brokerages.
NYSE Euronext and Nasdaq OMX Group Inc. said the suspension would last through tomorrow, “pending confirmation,” according to e-mailed statements. The SEC will stay in communication with the markets as the situation warrants, said John Nester, a spokesman for the SEC in Washington.
Options trading will also be closed, according to Gail Osten, a spokeswoman for CBOE Holdings Inc., which operates the largest equity derivatives market, and Joseph Christinat, a spokesman at Nasdaq OMX.
“It’s an inconvenience, but clearly the safety of the employees and participants in the market is a primary concern,” James Angel, a professor at Georgetown University’s McDonough School of Business in Washington, said in a phone interview. “Even if the exchanges can operate totally remotely, people connecting to the exchanges may be battling floods. We ran into the same issue after 9/11 even though Nasdaq and other trading venues could operate. ”
Blizzard, Gloria
The last time the NYSE cut trading hours for weather was Jan. 8, 1996, when a blizzard dropped more than 20 inches on New York City. It last closed for a full day for weather when Hurricane Gloria hit on Sept. 27, 1985. Markets have not closed for four days in a row since the start of 2007 when, following a weekend and the New Year’s Day holiday on a Monday, they shut on Jan. 2 to observe a day of mourning for President Gerald Ford’s death the previous week.
“Everybody wants to get the markets open,” the NYSE’s Leibowitz said. “We all know how important this is and we take the decision seriously. People expect the markets will be resilient and able to operate. The tenet is that the markets should be open if at all possible.”
Workers stacked sandbags in Lower Manhattan while banks and brokerages tested contingency plans, encouraged employees to work from home and prepared to operate with skeleton crews. Governor Andrew Cuomo’s order that subway, bus and commuter rail services be closed starting at 7 p.m. Oct. 28 left many of the city’s almost 170,000 securities industry employees wondering how they would make it to work.
The hurricane is predicted to make landfall late today in southern New Jersey, then turn inland, according to an advisory from the National Hurricane Center in Miami. Winds may cause a tidal surge as high as a record 11 feet (3 meters), according to New York City Mayor Michael Bloomberg.
In Lower Manhattan, cranes laid concrete barricades yesterday at Goldman Sachs Group Inc.’s headquarters at 200 West Street. Sandbags were piled along garages and doors at Four World Financial Center, the offices of Bank of America Corp., and lined the sidewalk facing the river outside the Depository Trust & Clearing Corp. and Nymex.
“Hopefully we’ll be back to work within 24 or 48 hours,” Ben Schwartz, the Chicago-based chief market strategist at Lightspeed Financial LLC, said in a phone interview. The broker- dealer provides execution services for both retail and institutional clients. “The storm was anticipated and you had to expect issues with the opening of the market with such a big storm coming, so I don’t see longer-term impact.”
Government Shuts
The storm, 900 miles across, shut the federal government and state administrations from Virginia to Massachusetts. It halted travel and upended the presidential campaign. It may cause more than $6 billion in damage and knock out power to 10 million for a week or more.
Sandy packed maximum sustained winds of 85 miles (140 kilometers) per hour, up from 75 mph earlier, the National Hurricane Center said at 8 a.m. New York time. The storm’s eye was about 310 miles south-southeast of New York, moving at 20 mph. It is not expected to weaken before landfall at Cape May, new Jersey, the center said. It may bring a surge as high as 10 feet (3 meters) in Manhattan.
The threat of water coming onto shore prompted Mayor Bloomberg to call for the evacuation of low-lying neighborhoods including Battery Park City and areas near the East River in southern Manhattan. The mayor is founder and majority owner of Bloomberg News parent Bloomberg LP.
The evacuation order resulted in the closure of the Nymex floor, CME Group, its owner, said in an e-mailed statement.
Financial firms closed some offices, conducted business from other cities, reserved hotel rooms and let employees work from home.
Citigroup Inc. and Goldman Sachs Group Inc. are among Wall Street firms that shifted operations to other cities and told staff to work from home as Hurricane Sandy forced evacuations.
Employees at Citigroup, the third-biggest U.S. bank by assets, won’t be able to enter Lower Manhattan offices on Greenwich Street and Wall Street, which include the main trading floor, according to a memo sent to workers and confirmed by Shannon Bell, a spokeswoman. Goldman Sachs, whose corporate headquarters at 200 West St. is also located in an evacuation zone, told the staff in an internal memo that most of them will work from home.
Goldman Sachs, the fifth-biggest U.S. bank by assets and the largest equity trader by revenue, said in its memo that it would shift some activities to London and locations around the world, with some employees working from offices in Greenwich, Connecticut, and Princeton, New Jersey. Staff deemed critical may be called upon to report to offices in Lower Manhattan and Jersey City, New Jersey, according to the memo.
Citigroup’s main U.S.-based trading office at 388-390 Greenwich Avenue is included in the city’s mandatory evacuation order, as are some branches and an office at 111 Wall St. according to the bank.
