Twenty-seven percent of the big financial firms surveyed on behalf of a trading systems supplier lack disaster recovery plans for their securities trading rooms, the vendor said last week.
Officials of British Telecommunications PLC said the number of Wall Street firms lacking trading room contingency plans was "startling."
The officials noted that in recent years a number of major U.S. cities have been hit by disasters, including the 1993 terrorist bombing of New York's World Trade Center. That blast that severely hampered the operations of several investment banks for several days.
Commercial banks are required by the Federal Deposit Insurance Corp. and the Comptroller of the Currency to have contingency plans in place in the event of calamities.
Investment banks' main regulatory body, the Securities and Exchange Commission, also has rules stipulating disaster recovery planning, but they mostly cover back-office activities, and not trading rooms, according to Joel F. Tietz, an assistant vice president for disaster recovery planning at Chubb Services Corp., a risk management consulting firm.
"The good news is that most firms are ready," said Marc Steatham, the trading systems marketing manager with British Telecom in New York who oversaw the survey.
"Given the current environment, trading firms have a responsibility to their customers to be prepared for any contingency. That's why we felt it was important to alert our customers that a significant number of firms do not have disaster recovery plans in place."
The 90 firms questioned had an average of 370 traders each, with the total number of employees potentially affected by disaster recovery plans was over 32,000. The surveyed firms included 43 broker-dealers, 31 domestic and foreign banks, 13 money managers, and three exchanges.
A few of the largest investment firms surveyed said that though they had been studying contingency plans for a number of years, "the size of their operations had precluded them from making actual provisions because of the enormous cost of duplicating their trading rooms," the report said.
Several other firms said they were remaking their contingency plans due to mergers, acquisitions, or relocations of their trading rooms.
In other facts gleaned from the study, of the 65 companies who said they had a recovery plans in place, half said they would use sites at another company location in the event of a disaster, and a third said they had contracted with third-party backup facilities.
