Stock Markets Expected to Remain Closed Tuesday

U.S. stock market executives, regulators and brokers have agreed to close the U.S. stock markets on Tuesday because of Hurricane Sandy, with an official announcement coming shortly, said people who were on an industry-wide call on the matter on Monday.

Every effort is being made to reopen markets on Wednesday, but a final decision has not been made yet, one of the people said.

The decision involved senior leadership of the exchanges, executives from brokerage firms and officials from the U.S. Securities and Exchange Commission.

The U.S. stock market’s closure on Monday was its first weather-related shutdown in 27 years.

Bond markets, which closed at noon EDT on Monday, will not reopen on Tuesday, a trade group said.

“It doesn’t make sense to put people in harm’s way or to only have half a market,” said Nicholas Colas, chief market strategist at ConvergEx Group in New York. “If just the electronic market was open, that wouldn’t provide enough interest, with everything else still closed.”

Equities trading executives said they were spending the day Monday pressing NYSE Euronext and the Nasdaq OMX to clearly communicate their plan to avoid a repeat of Sunday night.

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

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, the sources said.

The decision on whether to keep markets closed on Tuesday comes as Hurricane Sandy began battering the U.S. East Coast on Monday with fierce winds and driving rain. The monster storm shut down transportation, shuttered businesses and sent thousands scrambling for higher ground hours before the worst was due to strike.

In New York, the mass transit system was shut down on Sunday evening, and many Wall Street employees were working from home, although major financial services firms were open for business at least with skeletal staff. Flooding is already hitting parts of Lower Manhattan and parts of New Jersey even before the storm makes landfall.


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.

Peter Kenny, managing director at Knight Capital in Jersey City, New Jersey, said the bigger financial institutions were willing to have staffing to stay open.

“The closer it got to midnight, the less sense it made to do it, because people were willing to do less and less,” he said. “Then we got a message that our building in Jersey City, the front doors are going to be sandbagged, so that effectively ended that.”

An NYSE spokesman said a decision on when to resume trading was an industry decision.

Joe Christinat, a spokesman at Nasdaq, said, “All the exchanges and members and regulators and city officials are discussing this right now.”

T.R. Lazo, a lawyer at the trade group Securities Industry and Financial Markets Association, who is leading coordination of how to resume trading, did not return a call for comment.


The securities industry would have preferred that bond markets had remained closed all day Monday, but the U.S. Treasury department had a bill auction scheduled that had to proceed, two people familiar with the situation said.

Most of the trading activity on Monday in bond markets was in money markets, according to a source at a large Wall Street bank.

Clients have been trying to quickly roll over debt that was coming due Monday and Tuesday in the small window they had this morning before markets close. There was very little to no activity in other markets, the source said.

The stock market’s closure means that companies that were looking to go public may have to wait longer. Six initial public offerings currently scheduled to price later this week will likely have to be pushed back, equity capital markets sources said. They added that 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.

A spokesperson for Restoration Hardware, the highest profile of the public offerings set to launch this week, could not be reached for a comment.

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.