The New York Stock Exchange and the Nasdaq stock market, rivals for company listings and trading fees, have agreed to trade each other's stocks in case of disasters such as the attacks of Sept. 11, 2001.
The Securities and Exchange Commission urged the world's biggest stock markets to develop reciprocal trading plans in case either of the world's two biggest stock markets are unable to operate from their primary and backup locations.
After the terrorist attacks on the World Trade Center, six blocks from the NYSE, U.S. markets shut for four days, the longest closing since the Great Depression.
"This is a very logical and mature thing for them to have agreed to," said Rep. Christopher Shays, a Connecticut Republican who is a member of the House Financial Services Committee and chairman of a House national security subcommittee. "This would occur in very rare instances, and it makes so much sense to ensure that nothing brings down the USA and its market economy."
This month, Nasdaq alerted head traders at securities firms that its Computer Assisted Execution System can be used for trading the NYSE securities in the event of a catastrophe. NYSE Co-President Robert Britz told Congress in February that his exchange "is ready to trade the top 250 Nasdaq stocks, which comprise almost 80 percent of Nasdaq's average daily volume."
The floor-based NYSE and the all-electronic Nasdaq said they have adjusted their systems to accept each other's trades and to process orders. One technical issue they overcame was being able to accept Nasdaq stocks' four-character symbols and NYSE stocks' three-character symbols on each other's systems.
Britz said the NYSE and its member firms would complete testing this quarter of modifications it has made. Nasdaq urged traders to complete their planning and testing no later than Oct. 1. It will then "determine whether more comprehensive point-to-point and industrywide testing programs are warranted," it told head traders.
Under the reciprocal trading plan, only NYSE member firms would be able to trade Nasdaq stocks.
Only registered Nasdaq market-makers would be able to post quotes in NYSE securities. Others would be able to put in orders for stocks if they created connections to the Computer Assisted Execution System.