NEW YORK — The reputation of the New York Stock Exchange will suffer after it failed to have a back-up facility to deal with Hurricane Sandy, Arthur Levitt, former chairman of the Securities & Exchange Commission, said Tuesday.
“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 back-up 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.”
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 exchange’s 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. that night that all markets would be shut on Oct. 29.
The NYSE’s 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 you’re going to have a stock exchange, it should have a back-up facility of some sort so that regional events don’t 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 world’s most prominent exchange.”
The view is “disappointing,” said, Duncan Niederauer, chief executive officer of NYSE Euronext.
“Obviously Arthur has been involved in the industry for a long time but is maybe a little out of date with the facts,” he said. “We had a contingency plan. It was approved by the SEC in ‘09. It was communicated to everyone in ‘10 and tested earlier this year, and the industry simply preferred that we not implement that plan on Monday and Tuesday.”