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Hurricane Sandy is barreling down on the Big Apple with potentially unprecedented force, and the danger has been deemed grave enough to close all trading on the three major stock exchanges. All three -- owned by NYSE Euronext (NYSE: NYX  ) , Nasdaq OMX (Nasdaq: NDAQ  ) , and the privately held BATS Global Markets -- have well-established electronic trading platforms. However, wide-ranging discussions with politicians, regulators, and brokerage firms convinced market operators that it was safer to shut down entirely, avoiding risk to even the small number of technical staff needed to maintain the electronic infrastructure that handles nearly all market transactions.

CME Group (Nasdaq: CME  ) , which runs the NYMEX commodities exchange as well as the Chicago Mercantile Exchange, will shut down its New York trading floor, but its electronic trading platform will remain open.

A rare occasion
The last time the exchange closed for weather reasons was Sept. 27, 1985, as a precaution against damage from Hurricane Gloria. The threat was enough to close all exchanges nationwide. It wasn't that Gloria was a superstorm that attacked the entire country's financial infrastructure. One critical trade-processing technology company had to shut down its servers because of cooling problems, leaving any open exchanges unable to complete orders. That incident led to changes in the way stock-price information was processed, and modern trading systems are unlikely to suffer similar problems.

Stock exchange closures due to natural disasters or other major calamities have been few and far between. The destruction of the World Trade Center on Sept. 11, 2001, forced the exchanges to close for four days, from the 11th through the 14th. When trading resumed on Sept. 17, the Dow Jones Industrial Average (INDEX: ^DJI  ) dropped by 685 points, the third-largest point decline in its history.

The New York Stock Exchange has only missed five other normal trading days  in its modern history as a result of disasters, including Hurricane Gloria in 1985. Its floor stayed dark on July 14, 1977, after a massive power failure ripped through the city. Exchanges in other cities remained open, and trading in New York resumed the following day without incident. A major snowstorm on Feb. 10, 1969, also kept stockbrokers from the New York Stock Exchange, but other exchanges showed gains on limited trading. The last multiday weather closure was well over a century ago, when a fierce snowstorm shut down the exchange on March 12 and 13 in 1888.

A less-prepared market
Closures for other reasons have had a more lingering impact on the market. In 1968, the stock exchange was closed every Wednesday from the middle of June to the end of the year, to allow brokerage firms to work through a massive snarl of paperwork resulting from swelling trade volume. This series of shutdowns eventually forced the securities industry to modernize, resulting in a financial sector that now relies on computers and provides a far greater level of specialization.

The specter of a world war also forced an extended shutdown of the markets, stretching from July 31 to Nov. 27 in 1914, to prevent a torrent of sales from desperate European stockholders. In those days, adhering to the gold standard would have forced American banks to honor European requests to exchange their proceeds for gold. With no exchanges available for the Europeans to sell through, a vast pool of wealth stayed locked up and inactive for months. Chase National Bank chairman A. Barton Hepburn remarked at the time that "there was no course open to the New York Stock Exchange but to follow suit," as other exchanges around the world had already closed down.

More than 600 members of the New York Stock Exchange greeted the opening bell with a cheer when the trading floor reopened for very limited trading in some bonds that November. Full, unrestricted trading in stocks didn't resume until the following April 1. A year later, the Dow had returned to normal and had even gained 5% from the first day of the closure.

There's virtually no chance of a similarly long stretch of market inactivity today. There are too many participants, too many stocks, and far too many interconnected global trading systems to justify anything on 1914's scale, or even on the scale of 1968. However, extreme weather conditions will always remain a risk to safe and effective trading operations as long as major exchanges locate their operations in low-lying coastal areas, like New York City. The power and history of New York's financial industry make it unlikely that we'll ever see the exchange move to safer climes, but there may come a time in the far future when this sort of relocation planning will be necessary -- not just for the exchanges, but for all of New York City.

For the sake of our friends, colleagues, and readers in the Big Apple, let's hope that day never comes. Stay safe out there today, New Yorkers. And readers, if you'd like to offer your thoughts on the market closure, we invite your comments below.

Fool contributor Alex Planes holds no financial position in any company mentioned here. Add him on Google+ or follow him on Twitter, @TMFBiggles, for more news and insights.

The Motley Fool owns shares of CME Group. Motley Fool newsletter services have recommended buying shares of NYSE Euronext. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.

Read/Post Comments (5) | Recommend This Article (31)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 29, 2012, at 12:40 PM, GingerInOz wrote:

    When I was a little girl, Dad went with all his girls (Mom and 4 girls under 4 years old!) to the Newark ell. He'd say goodbye and hop out, picking up his WSJ on the way to NYC. We would have LOVED to have him home all day!

    It's unfortunate the markets close when people have business to do and money is lost just because of the shutdown. But here in the Great Plains where tornadoes and blizzards create all kinds of havoc, we are glad precautions are taken to keep those we work with, either person-to-person or tangentially, safe from the storms.

  • Report this Comment On October 29, 2012, at 2:29 PM, TMFDarwood11 wrote:

    I got to hunker down when Hugo hit Charleston. I lived off of water I had stored in the hotel bathtub for a few days. I also got on an airplane and left NOLA just before Katrina hit. That airplane, by the way, was less than 50% full.

    There are problems, and then there are PROBLEMS!

    A relative in NYC said in a telecon yesterday that "Irene wasn't all that bad." Yes, that is true, and for some of us, the "Panic of 2008" wasn't all that bad, either.

    My point? There are some things that have big impact on our lives, and sometimes people die or see their wealth destroyed.

    Most of us worry about the wrong things.

    That is not at all a surprise to me. We live in a really insular society. Screw up, and there is probably a government agency to help you out. Financial disaster? "Only" about 15 percent of the homes in the U.S. are underwater.

    The New York Stock Exchange closing for a day or two? Probably no big deal. Of course, the disruption to the President's re-election campaign, and Michelle being stranded in Chicago, "Priceless."

  • Report this Comment On October 29, 2012, at 7:41 PM, clbjblk wrote:

    Used to love to go to Wildwood NJ when I was a kid in Philly back in late 60's, the smell of salt water the boardwalk the taffy the circus atmosphere at night with the rides and games and there was still the race card going on, people talking about vacations in other parts of the shore because of that. I wonder if It is still wildwood or has it changed, I never had the problem as a kid it was just the adults and I never went with my family, neighbors took me my dad was in Nam fighting so we all could swim on the beaches at home only to loose the war and get spat at when he came home. What does this have to do with the storm, well they will just clean it up and make it better and we will hear about how much it cost the insurance industry, so what is the difference about the destruction of a storm and the future it brings. Who will take the brunt of the pain will it be the landowners now that get forced to sell that did not have costly ins policies or the city inspectors saying it has to be torn down it is unsafe while the investors come in and prey on what once was and how they can make it better. Who will the Fools of investors like more the city inspectors or the new developers or maybe there will be Federal aid to help the poor rebuild again. They call it the Perfect Storm but the Perfect Storm is in Washington D C who will take this as the luck of the draw because it takes the heat off his misuse of leadership that left Americans dead at the Embassy such timing for mother nature, but the poor will think more because this is a direct hit on US soil and soon forget why they have soil to build on in the first place. What will the Washington Post remember more and we are not talking about

  • Report this Comment On October 29, 2012, at 11:48 PM, Twake4d wrote:

    Hello it's 2012, The markets are electronic and should have inland backup centers that were open. No excuse, even if Wall St blows away the markets should be open. Fedex learned this 30 years ago jeez.

  • Report this Comment On October 30, 2012, at 3:30 PM, Libor8erBlake700 wrote:

    Glass Eye. (0) In 2010, the Icelandic Eyja-fjaqla-jökuql blew its normally tolerible stakk. Abnormal mix of weather conditions made this eruption more lethal to jet-liners than previously. A jet turbine is analogous to an internal propellor & thus more vulnerible to glass dust, which may sieze an enjine as surely as sukked-in seagull. Guess how many old-fashioned prop-planes are still for hire - not a lot! So North Europeans were grounded by order.

    Glad Fools. (1) But Willie Walsh (boss of BA) took off to test the air himself; while Michael O'Leary (of RyanAir), renowned for not gladly suffering fools, sought 2nd opinions from his own boffins. "M", my girlfriend with me in that other volkanik Paradise, Italy, needed to soon be in England for her customer. All long-haul 'buses & trains were booked solid for a fortnight. This holiday however we'd happily swapped push-bikes for hire-car & Galloped from Gallipoli, almost end of line in S Italy, stopping only overnite @ Hotel Rubicon (they gave us Caesar's own bed, we were so honored!) to make Aosta Valley by 2nd night & surrender our horse (it's called Europcar but they make you return it to the country you hire it, so no point driving to England).

    Via Mt Blanc (2) we tunneled on several 'buses & trains to Paris Gare de Lyon, where M found us a night'bus to Euro-Lines (National Express)'s terminal & we bought a room with bath, rather than krash our 3rd night on 'bus station floor like some of our fellow travelers.

    Morning Metro (3) took us to Gare du Nord & breakfast outside café oppozite: my partner was so distracted posing with waiter for 'fotos, we had to sprint, having forgotten about entraining for Calais, where queued hours for rip-off ferry Bakk to Blighty. We then read in Fnancial X of better-seazoned travelers than I & with more languaje skill who sailed home on slow-boats from China & far Riskier Routes than ours.

    Entrepreneurs Vs State (4) By then our orijinal flight was re-instated, we couldn't've foreseen that: still Michael O'Skinflint refuzed to re-imburse our land & sea flight ("Howd'u expekt me to run no-frills airline & compensate your missed connexions, blah-blah?"). Also, it took weeks of e-mails to get American Express to honor what to it was a trifling amount of fuel, 'bus & hotel fares & we vowed to never again use AmEx insuranse. But O'Leary's still one of my buccanero-heroes alongside Laker, Branson etc.

    Below-Radar (5) Whatever Nature throws up, we must work with whatever tools that same Nature makes availible. Yes, one may worry or insure for 1001 things which may never happen, like needing unaffordible flying doctor, should one ski off the abyss. Or:- one may watch for pleasant surprises, off the radar-skreen: I learnt more in traveling overland than lazing on beach & returning squashed in O'Skinflint's Sardine-Class.

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