Hurricane Sandy shuts US stock markets

NYSE Euronext and Nasdaq OMX Group,the largest two U.S. exchange operators,said they intend to reopen Wednesday,conditions permitting. The bond markets will also close on Tuesday,with traders aiming to reopen on Wednesday.

Wednesday is a key trading day because it marks the end of the month,when traders price portfolios. With New York still to feel the full impact of the storm,fears remained that wind damage and possible power outages could test the ability of markets to reopen. New York’s mass transit system,which most employees use to get to work,also remained shut and it was unclear when service would be restored.

The broad effects of the market shutdown – the first for the NYSE in 27 years due to weather – were beginning to become more apparent by Monday,as analysts estimated banks and trading firms could lose tens of millions of dollars in revenue.

Some companies postponed their quarterly earnings,and banks closed branches in the Northeast,while promising to waive certain fees in hurricane-threatened areas.

Disaster modeling company Eqecat said the storm is likely to cause insured losses of $5 billion to $10 billion,and economic losses of $10 billion to $20 billion.

The trading closure also threatened to delay IPOs of at least six companies,while Facebook Inc employees were prevented from selling shares in the social media company after a lock-up on trading expired.

If you go two days,you really start to create some serious financial stress for some players that need to get something done,said Jim Paulsen,of Wells Capital.

As Hurricane Sandy began battering the US East Coast on Monday,many Wall Street employees stayed home. Major Wall Street banks had planned to open with skeleton staffing,but with the stock and options markets closed and the bond market closing at noon,many people said they had little to do.

There’s nothing to do,so I’m just relaxing,said one New York-based equities trader at a large global investment bank,who spent most of the day in his pajamas,staying in touch with his boss and clients via phone and email.

Steve Gerbel,who runs hedge fund Chicago Capital Management,said that when he called a Goldman Sachs Group Inc trading desk on Monday,he got to talk to employees from its Salt Lake City office for the first time.

Since markets were closed,Gerbel said he would spend most of the day dealing with paperwork that he typically put on the back burner,and his employees would do the same,or clock out early.

I predict my office will never be cleaner than it will be today,he said.

For operations and back-office staffers,it was a big day,as workers struggled to keep data centers and company systems up and running.

LIKE HERDING CATS

Earlier on Monday,equities trading executives pressed the stock exchanges to clearly communicate their plans to avoid a repeat of Sunday night’s uncertainty.

Market participants and regulators decided late at night on Sunday to shut the stock and options markets,reversing a plan to keep electronic trading going on Monday,leaving some people complaining about confusion.

The biggest problem with the New York Stock Exchange’s initial plan to trade exclusively over its ARCA electronic system was that the contingency plan that it had created in March had not been vetted by many brokerage firms,sources familiar with the situation said.

The decision to close the stock and options market came on Sunday night after SIFMA,the Wall Street trade group,held a conference call around 11 p.m. to debate whether to close,said a brokerage executive,who requested anonymity because he is not allowed to speak to the media.

It was like trying to corral cats,the executive said.

NYSE spokesman Richard Adamonis declined comment on friction with the brokerage community over the on-again,off-again decision to open trading during the storm.

Through the storm,SIFMA has and will continue to work with a variety of market participants to ensure smooth market function,spokeswoman Liz Pierce said in an email.

On Monday,the industry tried to avoid a repeat of the confusion. A decision to close the markets on Tuesday had been announced by early afternoon,after an industry-wide call that included regulators,broker-dealers and executives.

BONDS AND IPO PRICINGS

On a call Sunday evening hosted by SIFMA,with big banks,exchanges and other industry representatives,banks pushed for bond markets to open in New York on Monday,at least temporarily,to help secure short-term funding needs for themselves and their clients. The bond markets were open until noon,on an abbreviated schedule.

Many cautious clients took care of funding needs through Wednesday,according to a source at a large global investment bank. If firms or their clients need to get trades done during the rest of the week while markets are closed in New York,they can trade out of bank offices in Asia or Europe,he said.

The stock market’s closure means companies that were looking to go public may have to wait. Six initial public offerings scheduled to price later this week will likely have to be pushed back,equity capital markets sources said. They said decisions were being made now between underwriters and the issuers.

We can’t market some of these deals while no one is on the other side of the phone,said one equity capital markets banker at a large Wall Street bank. Some deals may be pushed back to next week after the election,the source said.

Restoration Hardware,the highest profile of the public offerings set to launch this week,is still on track to price Thursday night,a source familiar with the matter said.

Radius Health,which was set to price its $61.8 million IPO later this week,is in a wait-and-see mode,said Chief Financial Officer Nick Harvey. We haven’t made any decisions yet,he added.

Equity futures continued to trade through Monday morning,closing at 9:15 a.m. EDT. CME Group Inc said it was closing its interest-rate futures trading as of noon EDT.

FACTBOX-Wall Street staff stay home as Sandy arrives

NEW YORK: Wall Street firms were set to open with limited staffing in New York City on Tuesday as stock markets remained closed due to Hurricane Sandy’s approach and many New York-based bank employees worked from home.

Here is a breakdown of what the major financial institutions and trade groups said about carrying out business on Tuesday:

AMERICAN INTERNATIONAL GROUP

Insurer American International Group,whose headquarters on Maiden Lane in Lower Manhattan adjoin the East River,said its offices will remain closed for a second day on Tuesday. AIG had previously said it did not expect any disruptions to operations due to the offices closures.

BANK OF AMERICA CORP

Bank of America offices at Two and Four World Financial Centers are scheduled to be closed on Tuesday. Many bank branches in the Northeast and Mid-Atlantic states will also be closed,along with Merrill Lynch wealth management offices in the storm’s path. The bank said it will work with customers affected by the storm.

Brian Moynihan,chief executive of Bank of America,sent an e-mail out to employees Monday evening advising staff to monitor the local news. We gave taken several precautions,including closing facilities in affected states and asking teammates to work from home in necessary,according to a copy reviewed by Reuters.

CITIGROUP

Citigroup Inc said its offices on Wall Street and in the Tribeca neighborhood of Manhattan,which are in mandatory evacuation zones and pertain mostly to trading and investment banking personnel,would remain closed on Tuesday. Citi facilities outside of such areas would be accessible for critical personnel only,the bank said in an internal memo to employees. Other staff should use work-from-home resources.

The bank earlier said it would operate from a backup trading floor in New Jersey and shuttle critical employees there as necessary.

Branches affected by the hurricane will not open on time Tuesday. The bank said it’s willing to work with affected customers,including waiving fees.

CME GROUP

CME Group Inc said trading would be suspended on Tuesday at the firm’s NYMEX headquarters,the world’s biggest oil and energy futures and options market,but other markets would open overnight and through Tuesday.

CME will reopen its U.S. equity index futures and options on futures markets at 5:00 p.m. CT on Monday for overnight electronic trading. The equity index markets will close 8:15 a.m. CT on Tuesday,for both the trading floor and its electronic trading system,CME Globex.

CME Group’s interest rate futures and options on futures including Treasury,Eurodollar and Fed Funds will reopen at 5:00 p.m. CT on Monday and resume normal trading hours on Tuesday,for both floor trading and electronic trading.

CME said all its New York floor-traded products will be available electronically during regular market hours,and that all other CME Group futures and options on futures markets will remain open.

CREDIT SUISSE

At Credit Suisse’s head office at 11 Madison Avenue in New York City,only critical staff have been told to come in. Others are working from home.

DEPOSITORY TRUST & CLEARING CORP

DTCC,an industry-owned corporation,said it would maintain operations on Tuesday,and expected all settlements to occur on a normal schedule.

GOLDMAN SACHS

The investment bank told employees in an internal memo on Monday that its headquarters in Lower Manhattan and offices in Jersey City,N.J. would remain closed on Tuesday.

Goldman Sachs Group Inc will have other employees working locally from Greenwich,Connecticut,and Princeton,N.J.,and many employees will work from home as well. It is also routing some trades through other offices in Europe and Asia.

MORGAN STANLEY

The Wall Street firm’s Times Square office will remain closed on Tuesday except for critical personnel who could get there safely,according to a memo from Chief Operating Officer Jim Rosenthal reviewed by Reuters. Morgan Stanley has been able to transfer most business functions to other geographic locations,or to employees working from home,Rosenthal said.

NEW YORK STOCK EXCHANGE

NYSE Euronext said it would close its markets,along with other exchanges,on Tuesday.

NYSE said it now intends to re-open its U.S. markets on Wednesday,conditions permitting,and that it would provide an update on Tuesday.

NASDAQ OMX GROUP

The exchange operator will close its U.S. markets on Tuesday,but said it planned to open those markets as normal on Wednesday. Exchanges of Nasdaq OMX Group Inc outside the U.S. are set to open as normal on Tuesday.

SECURITIES INDUSTRIES AND FINANCIAL MARKETS ASSOCIATION (SIFMA)

The Wall Street group said it is recommending a full stop for several bond markets on Tuesday that pertain to U.S. dollar-denominated bond trading in the U.S.,Tokyo and London.

Its recommendation pertains to government securities,mortgage- and asset-backed securities,over-the-counter investment-grade and high-yield corporate bonds,municipal bonds and secondary money market trading in bankers’ acceptances,commercial paper and Yankee and Euro certificates of deposit.

TD AMERITRADE

The online broker is closing corporate offices in Jersey City,New Jersey,and Baltimore,as well as some branches. None of the firm’s client service centers are in the path of the storm. Clients should be aware with the closure of U.S. stock markets means not all products will be available for trading.

WELLS FARGO & CO

Wells Fargo expects many of its Northeastern stores to open late or remain closed on Tuesday. The bank said it has decided to waive certain fees for customers in affected areas,including late fees and ATM charges,through Thursday.