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Last month's terrorist raids were a dramatic illustration of how vulnerable the

New York Stock Exchange

is to disaster. But it's a wake-up call that some doubt will be answered.

At the center of the debate is the exchange's century-old floor-trading system, which requires hundreds of specialist auctioneers literally to stand next to elaborate computers in order to complete trades. To some, the so-called open-outcry system is starting to look archaic -- particularly in light of the closure that followed the terrorist raids.

"Despite the fact that brokerages and market makers must have backup sites for their traders, the NYSE does not," wrote Meridien Research analyst Damon Kavelsky in a report about the attacks' impact on U.S. securities infrastructure. "In a time when redundancy and backups have become standard jargon in any technical solution, it appears it was forgotten for human-based processes."

The terrorist attacks severed lower Manhattan from the rest of the world, causing a four-day closure as traders were unable to return to 18 Broad Street. The suspension was the longest since the Great Depression, and with no backup location available, some $20 billion in average daily transactions went unconsummated.

"It was not until the city and state of New York opened up parts of lower Manhattan that trading could resume," Kavelsky wrote. "Trading depends on the physical presence of 18 Broad Street."

The NYSE is considering separating the trading floor into two separate locations and is in talks with


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to use its electronic system as a backup in case of future trading disruptions. Both NYSE and Nasdaq declined to comment on the talks.

But even with backup sites, risks remain. For instance, if a worst-case scenario occurred and large numbers of specialists were somehow killed, trading could be suspended indefinitely. "Even if you had a second and third site, what happens if multiples of thousands of people are lost who operate the organization?" said Richard Grasso, NYSE chairman and chief executive, at a briefing last week. "At what point do you step up and say it's irresponsible to open a market without that critical mass?"

The concerns extend a previous debate about the NYSE floor system, which has been criticized in the past as inefficient and weighted to the advantage of institutional players. The system is also expensive.

"You have the cost of owning a seat on the exchange -- those costs passed on through commissions, to investors -- the cost of operating the physical facility, the computer systems, all the support people right there," said Peter Rousseau, financial historian at Vanderbilt University."But it's also important to negotiate face-to-face on the larger deals, as it ameliorates the price impact. The costs aren't likely to outweigh the benefits soon."

Some 3,000 traders carry out Big Board trading from the NYSE floor. The elite among them are the roughly 500 "specialists" who execute trades through elaborate computer posts on the floor. These specialists are responsible for matching buyers and sellers and minimizing price fluctuations on big deals. Unlike on the Nasdaq, where each buy order must be filled with a single sale order, the face-to-face auction allows market makers to break trades into parts for more price flexibility.

"When you put a trade into the Nasdaq order book, that's that. But the market makers on the floor of the NYSE have more discretion on their tradingstrategy," said Kavelsky.

Meanwhile, for very big trades in shares that move very little volume and have wide spreads, face-to-face auctions are best, many traders believe.

"You have two different systems, and they both function really well," said Barry Berman, head of stock trading at Robert W. Baird, referring tofloor versus electronic trading. "Clearly there are some orders that are tough to move electronically. The ones that are not really liquid, if youtrade it electronically, you don't get any information, you don't find out what's going on."

That convenience would, for now, appear to doom any momentum toward a large-scale overhaul. In matters of contingency, the SEC is an overseer rather than a regulator, and the new chairman, Harvey Pitt, has so far demonstrated a hands-off approach, says Kavelsky. "He prefers to let market forces decide."