Sandy Teaches N.Y. Stock Exchange Some Lessons in Electronic Backup

NEW YORK (TheStreet) -- On the one-year anniversary of Hurricane Sandy, the New York Stock Exchange's (NYX) Head of Operations, Lou Pastina, tells TheStreet that the Exchange's emergency backup plans are more robust than ever. Even pre-scheduled events such as initial public offerings would have the option of moving forward in the face of another weather-triggered event in New York, he says.

The New York Stock Exchange's Print as "P" plan, allowing the switch to an electronic trading system through the NYSE Arca platform, formerly known as the Archipelago Exchange, has undergone numerous tests over the past year involving trading firms throughout the U.S. financial sector, Pastina said. The NYSE Arca's key datacenters are located in both New Jersey and Chicago.

The most difficult task for the NYSE is preparing systems to assure that enormous amounts of data are sufficiently backed up, including trades that may be in the process of being executed, Pastina said. And though machines handle the bulk of the chores, a minimum staff presence may be needed at the NYSE floor in Manhattan to help facilitate some aspects of the electronic trading system, he added.

Ultimately, the safety of the people is of course of the utmost priority, first and foremost. If their lives could be in any kind of jeopardy, halting the backup system would take precedence, Pastina said.

The NYSE's disaster recovery efforts for 9/11 and Sandy remain completely distinctive from each other but Pastina says there were changes made after 9/11 which if hadn't been done would have resulted in adverse consequences during Hurricane Sandy's landfall.

Lou Pastina spoke last week with TheStreet:

Pastina: There are some major differences between 9/11 and Sandy in terms of our disaster recovery. The biggest being that we moved our datacenter. We had two datacenters during 9/11, one in Manhattan and one in Brooklyn. If we had had those datacenters there during Sandy, we would have had major problems. The primary data center was in Manhattan and close to the East River, so it would have been problematic. Therefore, the biggest change was moving this datacenter out of this region and away from the trading floor.

TheStreet: What is the single biggest problem you faced even as your electronic trading backup system was running at maximum capacity?

Pastina: In both situations, Sandy and 9/11, the Exchange itself was unaffected. With Sandy, the water came as close as Beaver Street and Pearl Street but not into the Exchange. But the biggest problem, and it's similar in both situations, was the communications lines - not the communications lines into the Exchange, but communications lines for firms. If you remember in 9/11, the issue there was 90 West Street. The issue for Sandy for most of the firms downtown was 90 Broad Street. So people had to re-establish communications lines in both situations.

TheStreet: What have been the biggest lessons learned from all of the storm events that New York has faced over the last several years?

Pastina: Sandy was a massive storm, so it didn't only affect the New York Stock Exchange, but it affected other market centers and all of the firms. So, at the end of the day, it became clear throughout the entire community, including with the regulators, that the best answer was to close the market to make sure people remained safe. On Monday the 29th, people could have come into New York, but the mayor had closed the transportation system down and it wasn't clear if anybody could have gotten home to their families.

So that was a major thing to take into consideration. It's not just the machines, but people as well.

Also, a wakeup call for the industry was that everyone needs to take seriously these types of events and the testing of plans. At the time of Sandy, we had a plan for disaster recovery that had been filed with the SEC and tested within the industry. Now I can tell you that we have since updated and improved our DR plan, our Print as "P" plan, and we had a test in September with terrific participation. I think after an event like Sandy, the tendency for the industry is to step up in terms of testing.

TheStreet: How will prescheduled events such as IPOs be affected by the evolving contingency plans?

Pastina: Our all-electronic exchange, NYSE Arca, is at the heart of our disaster recovery plan and if a company had an IPO scheduled for that day and something catastrophic happened they could utilize our affiliate to take their stock public. Now whether they would do that or not is a matter for each company to decide.

-- Written by Andrea Tse in New York

>To contact the writer of this article, click here: Andrea Tse.>

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