In the wake of Hurricane Sandy, a report out of IDC Financial Insights alleges that some of the most prominent Wall Street business continuity plans have not been up to the challenge. For example, the New York Stock Exchange has a contingency plan to run as an electronic-only exchange in the even of such a disaster, but didn't follow the plan because of fears of running the environment with no hands-on human intervention.
ComputerWorld's Lucas Mearian reports that the consultancy argues that "not only has Sandy exposed the susceptibility of the contingency plans devised by major market players (exposing a lack of foresight concerning the potential impact of a hurricane that can simultaneously hit the [New York-Connecticut-New Jersey] area), but it has also given insight into [financial market regulators'] apparent inability to monitor electronic markets."
The NYSE Euronext stock exchange's business continuity plan would have allowed it to stay open as an electronic-only operation using its Archipelago (Arca) Exchange communications network. While NYSE's data centers stayed online through the storm and its aftermath, the shutdown decision was made because the exchange had never operated before in an electronic-only capacity.
As IDC Financial Insights analyst Marc DeCastro put it in the ComputerWorld interview: "The systems were fine -- it was getting people to run the systems that was the issue, which in of itself is also an issue, as they were unwilling to run without human intervention." DeCastro's report noted that "keeping the market open on a purely electronic basis, with the market having never operated this way even under perfect conditions, would only increase the chance of any minor malfunction to a high-frequency trading algorithm, causing potentially great disruption."
The lesson here is even the best-thought-out contingency and backup plans really need to be put to the test as they are prepared and approved -- adverse conditions are not the time for testing.