- The Washington Times - Sunday, August 29, 2004

NEW YORK — Wall Street’s dog days of August have the potential for a serious bite this year.

August is traditionally slow for investment bankers, fund managers and traders on Wall Street, and with the Republican National Convention in town, many top managers have headed out to avoid the hoopla.

But with the potential for several market-moving events this week, including the specter of terrorism here or elsewhere, investment firms have their contingency plans in place.

“There’s always a game plan whenever the senior guys are out of town,” said Scott Wren, equity strategist for A.G. Edwards & Sons. “You put a matrix of events and responses in front of the junior guys, and you make sure your senior people can be reached no matter what.”

The markets are usually quiet in August, when most brokers are on vacation. The demand from investors is traditionally low, and most firms take the opportunity to add new technology and train new personnel.

But with the Republicans meeting in New York and tensions still running high in the Middle East, the chances of what analysts call “a major negative catalyst” — a terrorist attack or a major disruption in oil supplies, for example — are higher than usual. Such an event can send stocks tumbling and commodities surging in a matter of minutes.

Most Wall Street firms would not comment on the specifics of their contingency plans, other than to say that client orders would be carried out as usual, no matter what happened.

Technology plays a large part of most brokers’ vacation contingency plans. Major institutions routinely program a wide variety of trades, automatically buying or selling a specific stock if it hits a specific price level. The junior traders substituting for more senior managers also will have detailed instructions on how to move money should the markets move in any direction.

There certainly will be people at the phones taking customer orders as usual, even if a major event causes a rush of selling. Most everyone on vacation will be armed with cell phones, laptops and other technology so he or she can remain in touch and jump in if needed.

“Nobody’s leaving town without the cell phones and Blackberries,” said John C. Forelli, portfolio manager for Independence Investment LLC. “Doesn’t matter if you’re in New York or anywhere else. The big money managers are in touch no matter what.”

Most of the absentees are portfolio managers and fund managers, the people who react to the market and make changes in mutual funds and large institutional portfolios, and the brokers who interact with customers the most.

As for trading desks at most firms, they remain at nearly full strength.

“We’re fully staffed here, and there’s a lot of thumb twiddling going on,” said Bill Groenveld, head trader for VFinance Investments. “If there are any occurrences, it’s really not going to affect us. It’s really the people managing the clients and calling the shots on whether to trade.”

The major equity markets are also prepared for the worst. The New York Stock Exchange has multiple backup trading floors at undisclosed locations within New York City, and the exchange can be up and running within 24 hours should something happen to its Wall Street location, NYSE spokesman Ray Pellechia said. The exchange also has contingency plans for trading should a major event happen elsewhere that would affect the market, though Mr. Pellechia would not give details.

The all-electronic Nasdaq Stock Market would be unaffected by any problems within New York City, as its major data center is in a highly secure building in Connecticut. A duplicate facility in Maryland can take over instantly should something happen in Connecticut, Nasdaq officials said.


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