From the moment it was proposed, there were skeptics. People wondered why the New York Board of Trade-the former NY Coffee, Sugar and Cocoa Exchange-needed to maintain a backup trading floor at a cost of $300,000 a year. After all, typically not even major exchanges have such sites. But the commodity market, which lost its offices at Four World Trade Center on Sept. 11, drew upon lessons from the first WTC bombing in 1993, an event that led exchange officials to ponder the question, “What if?”
“It happened on a Friday,” recalled Pat Gambaro, NYBOT’s EVP of floor operations and technology. “That weekend, we didn’t even know if we had a business any longer. We were scrambling around to figure out if we were going to get a loft, call the phone company, paint diagrams on the floor to simulate the ring. But when push came to shove, the city let us back in the building and we went back in on Monday. At that point, we realized that we couldn’t allow this to happen again.”
At that time, the exchange did have a cold site, a place to recover computer operations, and it was operated by SunGard at a facility in Philadelphia. But those systems, while of great value, would be meaningless if the exchange lost its trading floor and the means to operate.
That’s when Gambaro started to consider a hot backup site, one that would be ready instantly in case of an emergency. It was a radical concept at the time. No other exchange was considering a backup trading floor, and many exchange officials held onto a certain fatalistic thinking: if you were down, you were down.
But in the borough of Queens, across the East River from Manhattan, Gambaro found the facility that would eventually become NYBOT’s temporary home in the wake of Sept. 11.
“It was very nice,” he recalled. “It had everything we wanted of a hot site. We took space on the third floor for the computers. When we came down to the ground floor, both sides were warehouses. It was a real dump-mice running everywhere. But it looked like a trading floor to me. We went back, put together a staff paper-$50,000 for the computers and $200,000 for the space downstairs. $250,000 total.”
There was a lot of resistance, Gambaro said. It took a study by Deloitte & Touche-which showed that for every day the exchange was down, the industry would lose $3 million-to convince the market’s board of directors. Chubb Services, which was providing the space, built the new trading floor to Gambaro’s specifications at a total cost of $1 million. The exchange paid for $200,000 of that. Comdisco later bought the facility from Chubb.
During the next few years, the trading floor and its two trading pits sat there, collecting dust. Then the terrorists struck.
Of immediate importance was that all of NYBOT’s 260 employees were able to leave the WTC area safely on the morning of Sept. 11, though two traders with offices elsewhere in the WTC lost their lives. (There are almost 1,200 NYBOT traders.)
Recovery from the disaster meant getting back to business as quickly as possible. Without the redundant trading floor, NYBOT’s business might have moved to London or another domestic exchange, said NYBOT President and CEO Mark Fichtel. And many NYBOT traders and employees would probably be looking for a new way to earn a living. That’s when that dusty trading floor in Queens began to earn its keep.
Almost immediately after the attacks, 18 NYBOT employees were at the backup site putting the prearranged disaster-recovery plan into action. Steven Bass, NYBOT’s CIO, was the first to arrive, after walking over the 59th Street Bridge which links Midtown Manhattan to Queens.
In the time just after the attack, Gambaro was on the telephone, making sure everyone was safe, coordinating recovery efforts and reminding department heads of their emergency duties. But simultaneously another communications effort was under way; NYBOT’s employees’ and traders’ Web sites were updated to bring breaking news to staff and members.
“A few months ago, we had begun to actively pursue getting the members involved in viewing the Web site on a regular basis,” said Bass. “When this situation came along, a good number of them were fairly adept at finding their way around the Web page.”
The Web site wasn’t affected by the disaster since it was housed at a separate location. The webmaster, Walter Wood, immediately began working from his home, as did many other staffers who no longer had offices.
In fact, as part of the disaster-recovery plan, NYBOT made sure that key employees had access to the company intranet from their homes. Although most employees had their own computers at home, NYBOT provided desktops in some cases.
On Saturday, all the traders were called in for an orientation session where last-minute bugs were ironed out. For example, there weren’t enough phone lines for everyone-only two landlines per station.
“We went out and bought 120 cell phones that weekend,” said NYBOT spokesman Guy Taylor. Later, he said, the exchange added more lines, finally bringing the total to six per station. It also added fans, air conditioning, a whiteboard and sound-absorbing padding for the walls-the old trading floor had a ceiling 30 feet high. At the backup site, the ceilings were only half as high and created noise problems.
When the markets opened the following Monday, NYBOT was trading again. True , there were only two pits-compared to 13 at the World Trade Center location-and trading was in 90-minute shifts. But despite this constraint, trading volume was almost double the average-140,000 lots compared to 75,000 on a typical day.
NYBOT Presses Backup Trading Floor into Sudden Service
The upsurge in volume was partly due to the pent-up demand of the four-day shutdown. The rest was due to the compressed trading times. Eventually, trading settled down to about 50 percent over previous averages.
Now, the NYBOT is searching for a permanent home-for the trading floor, for its computer systems and for its employees. It might take six months-or even longer-to move to a permanent location, said Fichtel. As a result, it is expanding the Queens location and plans to add four more trading pits and new trader workstations. After the eventual move to the permanent location, the Queens facility will revert to backup status. With all the additions to the facility, the floor area will quadruple, and the total annual cost will triple to about $1 million.
Fichtel said if he were going to do it over, he would have had a minimum of four trading pits all along. “Secondly, we would have had more phone lines and thirdly, we would have had additional space for staging our members during the transition times,” he said.