Attacks emphasise need for continuity planning

The terrorist attacks on the World Trade Center on September 11 proved the value of business continuity plans and disaster recovery centres. Much of Wall Street has been able to conduct business with some semblance of normality, although firms like interdealer broker Icap faced difficulties since their primary and back-up electronic trading facilities were both in the World Trade Center.

Icap’s Electronic Trading Community (ETC) transaction system cannot be used at present for US Treasury bonds, according to Icap director of corporate affairs Mike Sheard. It will have to be "built back" from Tokyo and London to New York and connections re-established into the banks, he said. The system is currently working for Japanese Government bonds on a standalone basis.

Icap took a major hit in the disaster and was out of commission for a couple of days, according to Moneyline chief executive Jon Robson. But it is back up at various facilities in New York and New Jersey and is inputting its prices.

ETC was launched in February last year and earlier this year the company said it transacted more than $200 billion per month, or 25% of Icap’s US Treasury business, through the electronic system.

The firm doubly suffered because its disaster recovery site was in the south tower – right next to its offices in the north tower, but all but one of the firm’s 675 New York employees managed to reach safety. Icap has moved its displaced New York staff into the offices of other firms, including both rivals and clients.

Competitor Prebon Yamane housed Icap’s initial task force, which co-ordinated its temporary arrangements. The dollar cash, foreign exchange forwards and non-deliverable forwards desks are now located at Bloomberg’s premises at 500 Park Avenue. Medium-term swaps, short-term swaps and interest rate options desks are at HSBC’s offices at 111 Pavonia Avenue, Jersey City, New Jersey, on the 10th floor.

Sheard said, "We were very fortunate with the number of people who said ‘Can we help?’" He added that the company’s first priority is to get its staff relocated and it will also look for a new permanent location. Icap chief executive Michael Spencer, group chief executive, said, "It will clearly take several months for us to return to full operational capability."

Many financial institutions and technology vendors have been working non-stop to reroute damaged networks and relocate thousands of employees to remote centres and makeshift offices, while simultaneously trying to determine the fates of their employees.

Merrill Lynch had a total of 9,000 employees working in the immediate area, the vast majority of which were safely evacuated from its headquarters in the adjacent World Financial Center, which did not receive permanent structural damage.

Paul Honey, director of global contingency planning at Merrill Lynch, said the bank was able to re-open for business before the New York Stock Exchange was up and running the following Monday, September 17. Honey said Merrill’s network of command centres and open bridge telephone lines re-established communication quickly, and he has not heard of any customer disruptions or data distribution problems.

Honey added that the bank has yet to calculate its losses, but he said it was prepared. He and 28 executives from Wall Street firms on the Securities Industry Business Contingency Management Group have been meeting and conducting disaster rehearsals over the past year, and the entire plan was put into effect immediately on the day of the attack.

Honey declined to comment on the firm’s business-continuity vendors, the location of backup centres, or whether the disaster recovery line item on Merrill Lynch’s IT budget will be increased in light of recent events.

Inter-dealer brokerage Cantor Fitzgerald and electronic trading network subsidiary eSpeed, which occupied the upper floors of the North Tower, suffered devastating losses in people and IT. eSspeed chairman Howard Lutnick asked for and received a temporary halt in the trading of eSpeed shares on the Nasdaq Stock Exchange.

But, Cantor Fitzgerald and eSpeed's trading systems were fully operational at the re-opening of the US Treasury trading on September 13. Since the disaster, both had been operating continuously in the European and Asian bond and equity markets. The firm's other locations in the US and non-North American areas and system redundancies in New Jersey and London were unimpaired, enabling both to maintain trading activities.

The resumption of trading did not mitigate the human tragedy for Cantor Fitzgerald, eSpeed and Trade Spark, which employed approximately 1,000 people on floors 101 through 105 in One World Trade Center. As of the close of business on September 19, 347 employees were on a "confirmed safe" list. That puts the missing list at 623 people.

Tradeweb maintained offices in the complex, but all of its software, databases and office records were offsite. In an announcement, chief executive and president Jim Toffey said trading, managed through the London office, would resume in "a few weeks”.

Deutsche Bank had 5,000 employees in the area, split between 4 World Trade Center and a large tower of its own on adjacent Liberty Street, where asset management and corporate finance operations were housed. All of its trading operations were in a building on 53rd Street in midtown Manhattan. A spokesperson was unable to provide further details.

Morgan Stanley had 3,700 employees in the South Tower, and 40 were still missing as of September 20. The firm may have found some space in Jersey City for at least a partial permanent relocation, according to sources. No word was issued on its capital markets operations or systems, and calls to the communications office were not returned.

The Bank of New York experienced some problems with systems failures for its custody and payments operations, enough to cause Standard & Poor’s to review its credit rating for the bank, though there was no disruption to its equity trading networks at One Wall Street, a spokesperson said. The Bank of New York removed its downtown operations from two buildings near the disaster to several sites in upstate New York.

Bank of America had offices in the North Tower, and three out of 400 employees were missing as of September 20. It also occupies a tower on 57th Street in midtown, where, according to newswire reports, it was playing host to Sandler O’Neill & Partners, a research and investment banking firm and clearing client of the bank. It is unknown how systems were affected.

Lehman Brothers relocated from its offices in the North Tower to a facility in New Jersey and several rooms in a midtown hotel. Lehman, whose offices within the World Financial Center remain inaccessible, has taken over the Manhattan Sheraton Hotel to house its investment bankers, a spokesperson in London told RiskNews' sister publication Trading Technology Week www.tradingtechnologyweek.com. Trading staff, including foreign exchange traders, are at the bank’s New Jersey offices. The 400-person office there has been reorganised to fit five times as many people. The office will house 2,000 people when it reaches full capacity, the spokesperson said.