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Risk Management

10:51 AM
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Amex Runs Out of Steam

The American Stock Exchange had all its bases covered in the event of a power failure -- except one.

When the American Stock Exchange lost power on Thursday, Aug. 14, around 4:10 p.m., officials called Consolidated Edison for backup generators that were stored at an undisclosed location.

With a police escort, the generators arrived and electric power returned by 1:00 a.m. Trading systems were powered up and Amex officials thought they were ready to roll on Friday morning.

However, the exchange needed one more vital ingredient to operate its trading technology -- steam. Amex needs it to power the compressors that run its air conditioning and heating systems for the trading floor. "You obviously can't run that advanced technology in a climate that is not climate controlled," says an Amex spokesman.

Earlier in the evening, Con Ed assured Amex officials, "There would be no problem delivering steam throughout the system," says the exchange's spokesman.

As many buildings in lower Manhattan receive steam from the utility company, "We were comfortable with a decision not to relocate trading to a backup trading location," the spokesman says. Moreover, that crucial decision had to be made prior to 7:00 p.m. Thursday night.

After dawn broke on Wall Street, Con Ed notified the Amex that it was unable to deliver the steam because it had yet to restore electricity to most of lower Manhattan. "If it released the steam through all those buildings whose air conditioning systems were not running, it would have flooded all those buildings," says Amex spokesman.

Officials immediately scrambled, working with the New York City Office of Emergency Management (OEM) to locate a portable boiler that could make steam.

"So we had power-- the trading system was ready to trade -- but because Con Ed was unable to deliver what they said they were going to deliver, we had to locate a portable boiler," says the spokesman.

It took several hours to find the boiler and get it to the exchange. Once it was hooked up and the steam was cranking the A/C, the Amex traded from 3:45 p.m. until the close at 4:00 p.m.

Even though Amex specialists and members traded for only 15 minutes, "We felt we made a commitment to our customers," says the spokesman. It was also expiration Friday, "A critical time period for people who want to do closeouts on various (options) products. More importantly, by trading on Friday, it allowed us to set firm closing prices on options products which went a long way for helping us to operate normally on Monday."

Despite the problems on the steam front, the spokesman contends that Amex's emergency plans worked flawlessly. He also notes that Con Ed did deliver the generators as part of Amex's disaster-recovery plan.

"Obviously, with the exception of Con Ed not delivering on its assurance to us, we were fully prepared and our disaster-recovery efforts worked the way they should have worked. We learned. Unfortunately the steam and boiler situation will be factored into whatever happens next time," he says. "No crisis is ever the same." Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio

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