Hurricane Sandy caused unprecedented damage to New York, New Jersey and Connecticut areas. Power outages, loss of property, transportation disruptions, and trauma affected the financial community here more severely than any time since 9/11.
Many local residents were without power for more than a week. Folks with gas cans in hand stood in lines that often numbered more than 100 at filling stations hoping to procure part of limited supplies of fuel to power home generators. Transportation challenges kept many away from their jobs in the financial districts of New York, Jersey City, and Stamford, CT.
Most prominent were the closures of the New York Stock Exchange and NYMEX/COMEX trading floors for two days. Other firms, such as Knight Capital, whose headquarters on the waterfront of Jersey City, suffered office closures and disruptions until generators were able to kick in. Ikon’s lower Manhattan offices were without power as the firm relocated to temporary space. Office space in the NYMEX building, which did not experience power outages, found new tenants as the markets quickly recovered to normalcy.
Buildings south of 40th Street in Manhattan were largely devoid of power. The nighttime skyline was eerie—midtown icons such as the Empire State Building and surrounding buildings glowed as usual, but the darkness south to Chelsea, Greenwich Village, Tribeca, South Street Seaport created a void until the lights of Battery Park City on the southwest side of Manhattan made it appear as its own island. Battery Park City includes the World Financial Center, Goldman Sachs headquarters and NYMEX. The area was created by a landfill in what used to be part of the Hudson River. The power supply is on a different trunk from the rest of lower Manhattan.
Our proprietary trading company, which is located at 40th St. had power and was operational. One block south, on 39th St., things were completely dark. The problem was getting people into the office. Employees and traders outside of Manhattan worked from home as subway and bus lines were disrupted. With electronic trading functioning pretty much as usual, companies were able to continue trading from off-sight locations. We also have a backup facility in Pennsylvania, which is not on the New York power grid. If things got much worse we were completely set up to move traders there.
A force majeure was declared by CME Group for the COMEX depository operated by Nanfr, Tordella and Brooks (MTB). This depository is located in lower Manhattan where flooding was most severe. As precious metals move into the December delivery cycle this week, MTB will provide holders with metal at the Brinks facility. CME stated that MTB will compensate for costs during this delivery period as they contend with “operational limitations” caused by Sandy. MTB is one of five depositories licensed to deliver gold against COMEX’s 100-troy ounce gold contract. The depository held 29,276 troy ounces of gold and 33,000 troy ounces of palladium as of Nov. 23, according to data from COMEX. The good news is that there will be no disruption to the process.
As during the aftermath of 9/11, it was heartening to see the markets regain functionality very quickly with limited disruptions. The resiliency of the industry is robust. Even more heartening is the willingness of most to help one another, through lending office space, offering spare bedrooms and sofas to families displaced by the damage and power outages, and financial assistance.
CME Group established an Assistance Fund in the wake of 9/11 as a public charity to provide relief and assistance to people involved with the exchange who are affected by such events as Sandy. I am always impressed and encouraged by our industry’s community outreach during times like this. Experiencing us pulling together as we continue to deal with this tragedy is the silver lining of this very dark cloud.
Bill Purpura
Managing Director | Great Lakes Global Ltd.
wpurpura@gltdirect.com
NIBA Board Member
