August 26, 2011
Hurricane Watch: Can SEC Declare Bank Holiday Monday?
If Hurricane Irene is as bad as some feared, traders have asked me if the SEC has the power to declare a bank holiday and delay the opening of trading on Monday for all exchanges.
The answer is yes. It's happened before: on 9/11/2001 (a Tuesday), SEC Chairman Harvey Pitt did halt trading the following Wednesday through Friday, and reopened Monday, September 17.
Should they? I don't know, but it should be at least considered if there is significant damage.
This would greatly relieve the pressure on the NYSE to open Monday under what may be difficult circumstances. The NYSE has gone through great lengths to ensure a Monday open, keeping key officials in downtown hotels near the NYSE over the weekend. But with the mayor shutting down all public transportation — possibly into Monday — getting all but a skeletal crew for the floor together Monday may be impossible.
It's more than just getting people into the NYSE. There are traders on sellside desks all over the New York City region that may not be able to get to work; how do they service institutional clients?
The NYSE of course can can continue trading electronically through its Archipelago electronic trading system. But the floor is 25 percent of the volume. There will be very few "human" traders around to begin with.
What will we have — 100 percent high-frequency trading on Monday? If the storm is as bad as some feared, SEC Chairman Mary Schapiro should consider delaying or not trading at all Monday.