Video: Wall Street wary

By Scott Cohn Correspondent
CNBC
updated 8/31/2004 7:08:30 AM ET 2004-08-31T11:08:30

As the Republican National Convention is being held this week, New York City is on guard, and that also means guarding the heart of the financial world.

Security all over Manhattan is extremely high, and that includes financial institutions around the city. But banks and securities firms have also fine-tuned their plans if the security doesn't work — putting to use lessons learned.

Almost from the moment the stock market reopened after Sept. 11th, the industry has been planning because as huge an accomplishment as it was to get back in business, it also exposed some huge weaknesses.

The New York Stock Exchange, for one, had no backup trading floor. And some of the firms that did had outdated plans for them.

"A lot of firms rarely tested at all prior to September 11th, and that was apparent in the days after September 11th," said Steve Radich, Nasdaq’s chief information officer.

Nearly three years after the attacks, only now are Wall Street firms submitting their disaster plans to regulators, under a schedule approved earlier this year by the Securities and Exchange Commission.

But make no mistake — plenty has changed, according to the Securities Industry Association.

"The investment and all the work that's gone into business recovery planning since 9/11, it's real,” said Don Kittell, executive vice president at the SIA. “The capability to respond is much more than it was then."

Not only do firms test their systems more — the Nasdaq tests twice a month — they test each other's systems as well.

Industry groups, like the Bond Market Association, now have a direct line to authorities. And the NYSE has a backup trading floor now. Telephone lines to Wall Street have backups, too.

And security — which was always high — is now intense throughout the industry.

"It's going to take more than a couple of bombs to put us out of business,” said Joe Sack, executive vice president of the Bond Market Association.  “A lot more than a couple of bombs."

But as armed to the teeth as the financial district is now, what really worries planners are the kinds of attacks you can't prepare for: A cyber-attack or a dirty bomb outside the financial district. Officials admit Wall Street is still working on how it would respond. Among the keys: More backup facilities far from Manhattan.

And while the risk of terrorism is still fresh in their minds now, industry leaders like Mitchell Steinhause, chairman of the New York Mercantile Exchange, say there's still a risk of complacency.

"We have to be more aware and vigilant around our building, and just in general of our environment," Steinhause said.

There’s certainly no danger of complacency this week.  A number of firms are actually doing business from their backup sites during convention week, partly as a precaution, but more to keep their people out of Manhattan gridlock.

And some business continuity specialists, who have a new level of importance these days on Wall Street, are using this week as a chance to double check their backup systems — hoping they are nothing more than that.

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