Hurricane Sandy caught Wall Street by surprise. The markets went dark for two days while Lower Manhattan, Wall Street's backyard, reeled from the storm.
Now, one financial regulator is taking steps to address the flat-footed response.
Bart Chilton, a regulator at the Commodity Futures Trading Commission, criticized the “floundering†that kept the stock market shuttered. In a speech on Tuesday, he plans to urge financial firms and federal authorities to bolster coordination in the face of future calamities.
“Now that we have this stark and frankly frightening example to work from, we'd be negligent not to move quickly to make sure that our emergency systems are comprehensive and fully tested,†Mr. Chilton, a Democratic commissioner at the agency, said in remarks prepared for a financial industry conference in New York.
Mr. Chilton, who is also set to appear on CNBC on Tuesday morning to outline his concerns, argued in the speech that in “fa ir weather and foul, we need to ensure that our financial markets can continue to provide the grease for our country's economic engines.â€
Mr. Chilton called for the creation of a private-public task force that would convene in advance of crises like hurricanes. Calling it the Financial Market Multi-Agency Command, Mr. Chilton said the group would mandate technology testing protocols, spell out guidelines for operating in a crisis and potentially sketch a timetable for recovery efforts.
“We obviously can't predict the future, but we can - and should - attempt to think of and plan for as many contingencies as possible,†he said in the prepared remarks for his speech at Sefcon, an annual gathering of the derivatives industry.
Mr. Chilton's plans face several hurdles. A number of Wall Street task forces already exist, and most seemed to perform well in the aftermath of Hurricane Sandy.
The Securities Industry and Financial Markets Association, Wall Street's main trade group, ran multiple phone calls with hundreds of regulators and Wall Street officials to coordinate plans for reopening the markets. The Securities and Exchange Commission advised the group. And the Financial Stability Oversight Council, a body of financial regulators that was created after the financial crisis, convened to analyze whether the storm posed a wider threat to the financial system.
But Mr. Chilton's concerns center on the lack of preparation in the lead up to the storm. The New York Stock Exchange was forced to scuttle plans for shifting to an emergency backup platform because several trading firms had never tested their connections to this electronic system.
The new task force, he said, could mandate “significant†advance testing.
“Not only were many firms unsure about whether their galoshes were waterproof,†he said, “they hadn't even tried them on.â€
