The uninterrupted coverage of Sandy and the constant flow of "information" in social media is testimony to man's desire to fill the broadband pipe. As a trading firm, we pondered a more selfish aspect of the story : why were markets disrupted at all?
9-11 markedly sped up the dismemberment of centrally located price discovery. The CME Group was located on the vulnerable Chicago River and had, years earlier, been closed when a barge accidentally crashed into the wall and flooded the city's massive underground tunnels. Any registered firm was tasked with building and regularly testing a redundant operation away from its main address. Reports have to be filed that sights are operational even though dormant. So, with a massive but well advertised storm heading to the financial district, NO contingency operational plan was executed. Huge capacity and office space cost was left "on deck." There has to be a reason and the Exchanges are at the heart of it.
The other, as it appears now more important, structural change in the post 9-11 capital markets was the move to for profit status. The utility function of market providers was obliterated for shareholder homage to profits. A failure of the back up system (or a hurricane of flash crashes and melt ups) must have been judged as more detrimental than closure. So why are we required to have back up plans? What event are we supposed to be preparing for if Sandy does not qualify for implementation? Clearly, the executives do not trust the dis-intermediated and special interest price discovery electronic arcade they have constructed enough to flip the switch. Could it be that in a completely electronic environment during a disaster, the customers may have better things to do and only the handful of advantaged players would be left? Would trading "get loose" or perhaps stagnate from lack of exploitable order flow?
The bottom line is Sandy was a prime example of what redundant systems are built and maintained for. The utility function of exchanges is dead. Want better markets? Have the Government recognize the systemic importance of functioning markets and take the exchanges into GSEs for security reasons. The transaction tax idea would be killed once and for all, the budget deficit would improve overnight. (Yes, I'm being provocative) There's a reason the markets were interrupted lately. If you interact with the market in any way, you should want to know why that was.