The closing of the stock exchange for about a week after the 9/11 attacks seems imaginary in the world of trading around the clock today.
In the last 20 years, technological developments and extensive efforts to strengthen the stock market infrastructure have made such trading stops rare. Last year, when the Corona plague led to a drop in stock prices, a record volume in trading or the transition to long.distance work on Wall Street, the stock market remained open, and most of its core systems operated smoothly.
“Seeds of Great Destruction”
But some investors and senior officials fear that stock market activity could still be stopped in an attack – one that would use sophisticated tools to hack into computers rather than physical force.
“As we digitalized our lives, which was a great blessing overall, we also planted the seeds for greater destruction in terms of the ability to hack into our systems,” said former chairman of the Securities and Exchange Commission (SEC), Harbi Pitt, who was head of the agency September 11, 2001. “The potential for a ‘black swan’ event now exists every day.“
Terrorist attacks against the United States 20 years ago showed the vulnerability of the financial system to physical destruction. When the Twin Towers collapsed, killing more than 2,000 people, vital financial systems stopped working. The stock market remained closed for several trading days – the long closing Most of it since 1933 – while crews worked to repair the damage.The bond market was closed for two days.Stores dealing with futures commodities, even in remote places like Chicago, were temporarily closed as well.
In the years that followed, stock exchanges moved much of their key systems out of south Manhattan. Regulators have pushed companies to do more testing to make sure markets can stay open in the event of a disaster.
The demise of old.fashioned trading floors also made the markets less likely to face physical attacks. In 2001, thousands of traders would still come to the floor of the New York Stock Exchange every day. While the stock exchange building was not damaged, many telephone lines and information communications connections to the stock exchange were damaged, and board members were reluctant to allow traders and other people to return there while ground zero relief efforts were still ongoing.
Today, trading volume on the New York Stock Exchange and other exchanges is mostly electronic and takes place at information centers in New Jersey. The New York Stock Exchange, now part of the Intercontinental Exchange, still has a trading floor. But the amount of brokers in it is much smaller, and when the site closed for two months last year because of the corona, the impact of it was mostly symbolic.
“On September 11, I could not see how the markets would reopen. The entire nerve center of the financial markets was badly damaged,” said Eric Noll, a former Nasdaq executive who now leads Context Capital Partners. Will open. Much more resilience has been built into the system. ”
One source of this strength is a regulatory change from the mid.2000s that shattered what was in fact a duopoly of the New York Stock Exchange and the Nasdaq, and made it easier for new stock exchanges to compete with them. – 16 different exchanges, which in practice act as a backup to each other in case one of them collapses. Twenty years ago, however, a cessation of trading on the New York Stock Exchange would have caused trading in shares of the New York Stock Exchange to cease altogether.
“The way the world worked then, if the New York Stock Exchange sneezed, every other market caught a cold,” said Bob Zito, a former New York Stock Exchange executive who was on its board in 2001.
The last time a disaster caused the stock market to close was in 2012, when storm Sandy caused a two.day close. Although the stock exchanges had backup plans ready before the storm, banks and trading companies sought to close for fear they were unwilling to deal with the New York Stock Exchange’s emergency plan to physically close and work only electronically, the Wall Street Journal reported at the time.
Two years later, the SEC adopted a regulation requiring a coordinated annual review of the emergency plans of various exchanges, and additional requirements. Veterans of the stock market industry say this rule has helped make trading glitches less common and has given confidence that the markets will last the next time there is a disaster.
Fear of hackers
Still, there are weaknesses. Popular online exchanges like Fidelity Investments, Robin Hood and Vanguard Group have been plagued since the beginning of the epidemic, sometimes with massive traffic that made their sites or apps unavailable to customers.
The threat of hacking by hackers is bothering Wall Street executives and executives. In April, Federal Reserve Chairman Jerome Powell said in an interview with CBS that cyberattacks had become the biggest risk to the financial system, more than the factors that led to the 2008 economic crisis.
A cyber attack on the financial system could shake investors’ confidence more than the Sept. 11 attacks, said Jim Basso, chief investment officer at GenTrust, a $ 3.5 billion asset management company.
GenTrust periodically conducts load tests on the investment portfolio in order to examine in the model what the impact of an attack will be, says Basso, adding that in the company’s most serious scenario it has to deal with a situation where the markets will close for two weeks.
“If you had an extensive cyber attack, the question of when things will get back on track is less clear,” he said. “Such a level of uncertainty will hurt markets.“