Tell me about it, stud.
Sandy’s impact on the market this week was to shut down U.S. stock markets for two whole days – the longest weather-related closing since the Blizzard of 1888. That’s 124 years, if I used my calculator correctly. I looked at a website chronicling all the special closings of the NYSE from 1885 to present. The most shocking information I gleaned was that the market was regularly open on Saturdays up until the 1950s! Six day workweeks? How Dickensian. Looks like they quit working Saturdays about 65 years after 1885, and it’s been almost that long since the 50s…about time to drop another day, I think.
When Sandy’s path was predicted, the NYSE had originally planned to only shut down the physical trade floor, and keep the electronic trading venue (ARCA) open. Apparently, exchange customers fought to have all trading shut down on Monday, saying that the markets still need humans to function. Even though all-electronic exchanges other than the NYSE could technically have been open, they opted to close because the NYSE acts as the official opening and closing price-setter for many benchmark stocks.
Wait a sec – so humans still need to be physically present for markets to function? NPR’s Robert Siegel wondered the same thing, so he asked Wharton’s Jeremy Siegel on Tuesday why (or if) he thinks the exchange still needs a physical trading floor. (I heard the interview on the radio but looked up a transcript so I could reference it. You would think they would use something other than last names to preface the comments when both parties have the same last name, but no.) Siegel (that would be Prof. Jeremy) thinks the real reason all trading was suspended was not so much that electronic trading still needs people to function, but more that the NYSE would be at a disadvantage to other exchanges if their guys couldn’t make it to work, so they wanted to shut everything down until they were all on the same playing field.
Whatever the reason, markets re-opened on Wednesday and trading resumed smoothly, contrary to predictions of extreme volatility and volume from pent-up demand. See? A few extra days off from trading didn’t hurt a thing…they should really give some thought to dropping Fridays.
Sarah DerGarabedian, CFA
Director of Research