ny b7 nyse fdr- 12-11-03 mfr- roger burkhardt cto nyse 754

8/14/2019 Ny b7 Nyse Fdr- 12-11-03 Mfr- Roger Burkhardt Cto Nyse 754

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UNCLASSIFIEDCOMMISSION SENSITIVEMEMORANDUM FOR THE RECORD

Type of event: InterviewDate: December 11, 2003Special Access Issues: NonePrepared by: Em ily WalkerTeam Number: 8Location: NYSE 11 Wa ll Street, NYParticipants - Non -Com mission: (Me eting 1) Roger Burkhardt, Chief Te chnologyOfficer; (Meeting 2): Robert T. Zito, EVP CommunicationsParticipants - Commission: Emily Walker, Sam Caspersen

Commission staff spoke with M r. Roger Burkhardt, Chief Technology Office ofthe NY SE to gain greater un derstanding of the continuity of business issues faced by theNYSE at the closure of the markets on Se ptember 11, 2001 and what changes the y havemade since that time.M r. Burkhardt has been at the Stock Exchange for 3 years. He came in just priorto September 11, 2003. He said that he stayed with the Management Team in the Crisis

center that day. All the staff was kept on the trading floor because that was deemed thesafest place in the building. Their building is open through tunnels to the building on 20Broad Street. Because of this, they le t people in who were covered with dust after thefirst tower fell. He also mentioned that the NYSE had 130 in the 29 th and 30 th floor of theSouth Tower an d they evacuated imm ediately upon impact of the first tower. It was anorderly evacuation.

M r. Burkh ardt described the NYS E data system in place on September 11, 2001and the problem s that system incurred du ring the crisis. He said that they had a tradingdata center which they used all of the time which was part of a holistic system whichincluded market data vendors and as a separate event, the Depo sit Trust Clearing and theNational Security Clearing Corp. He noted that even after September 11, these datacenters ran normally all week even though there was no trading.He said that on Septem ber 11, the NYSE did NOT have any problems w ithtechnology or facilities. They had 2 data centers and 5 trading roo ms over 5 blocks.They have the capacity to move stocks to other floors. In 2000, they had put into placestate of the art IP protocols so all of the technology was up to date. The criticaltechnology issue that they faced on September 11, 2001 was connectivity to theirmembers. The connectivity issue related to the fact that they discovered after Sept. 11,that there was NOT a diverse routing from their members to the NYSE Data Center. Themembers were connected directly to the center and when the phone system of Verizon

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UNCLASSIFIEDCOMMISSION SENSITIVEwent down on 9-11, the back-up systems w ere also connected to the same central officein lower Manhattan. In addition, the Am erican Stock Exchange lost its building and wasmoved imme diately into a little used trading floor at the NYSE. Because there was noneed for application logic since all the AM EX applications run in the same data centersas the NYSE, the technology just pointed the application at different screens an d theywere up and running.

Following 9-11, in the aftermath report, the NYS E decided that they neededadditional, back-up trading floors an d different methods of connectivity to their members.The task force recomme nded tactical issues that could be accomplished quickly an d thenlong-term investments, hi terms o f tactical ideas, the following were accomplishedimmediately: 2 additional trading rooms to serve as back-ups were created. They feltthat the scope of the threat w as larger than previously thoug ht an d that it would bepossible to conceive of a scenario w here the N YSE was shut out for a long period of timefrom Lower Manhattan. They immediately dedicated 2 floors for back-up trading floorsan d they we re ready to go w ithin 60 days of Sept. 11. How ever, these w ere in the samebuilding. By 2002, they had developed alternate sites located outside the NYS E.A more long-term investment was to develop a system where the members werenot connected directly to the data centers but through access centers wh ich led to the datacenters. These access centers we re located in 6 areas around the country. W ith theconnectivity being the "Achilles heal" of the entire industry, they felt that now m emberscould connect 24/7 from access cen ters that would alleviate the back-up problem, hiaddition, the NYS E contracted private fiber from Con Ed which is guaranteed to bediverse from its other connectivity. At this point the SIAC data center which serves theentire industry authorized this new structure in May '02 and by Jan '03 it was live and allfirms were mandated to connect.An issue that M r. Burkhardt raised as a serious vulnerability for the NYSE an dthe markets in general is the existence of "carrier hotels". These are places where all thecarriers put their switching equipm ent and run cable between each other so they areconnected. He said that over 70% of the transatlantic traffic goes through one carrierhotel in Manhattan and the vulnerability of this high of a concentration is huge. He saidthat security standards are needed for these hotel carriers.He said that the SEC requested as a follow up to 9-11, that the NYSE an dNA SDA Q be able to back each other up. He said that NYSE does have e nough capacityto trade in the top 250 symbols and has tested it with member firms. He said thatNA SD AQ originally said they could not trade 3 symbols, but eventually worked out a

system where they could.In addition, the recognized from 9-11, that it may not be possible to get people towork so the NYS E is considering setting up remote netw ork operations w here traders cango to work near their home in case of an emergency. They are also working on setting upa reserve force by requiring key groups to have a trained an d ready to call upon reserveforce. Also, they are not placing key personnel in the building at the same time.

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UNCLASSIFIEDCOM MISSION SEN SITIVEThe Commission also spoke with Robert Zito who outlined the events onSeptember 11 from his viewpoint as Head of C omm unications for the NY SE and a keyplayer in the firm's response that day. He said that the first plane hit the North Tower.He saw the plane hit from his window. He called D ick Grasso, then chairman of theNYSE, who was at a breakfast in NY City. Dick told him to have their people evacuatedfrom the South tower which they immediate did due to short memories from the Pan Ambuilding. Between the first and second plane, Zito said that Dick Grasso had alreadycalled Harvey P itt, then chairm an of the SEC. After the 2nd tower was hit, Grassodecided to delay opening of the market. By the time the Pentagon was hit, they haddecided NOT to open that day. Then M r. Grasso locked down the building (whicheffectively means keeping people inside until it was deemed safe to go out). They keptall people on the trading floor because they thought it was safer than being outside,particularly as many people from the outside were coming into th e NYSE, looking for asafe haven. At 11 :15 -11 :30 a.m. Dick Grasso spoke to the M ayor and to the Office ofEmergency Management in NYC and was told that it was safe to let people out of thebuilding to go East or South. The Management Committee stayed. Dick Grasso lived inthe NYSE for several days.On Wed. Nov. 12, Mr. Zito said that Dick Grasso arranged for the heads ofmember firms, Harvey Pitt, Peter Fischer an d others to attend a meeting to discuss th efuture opening of the market. The meeting was held at Bear Stearns. He remembers adifficult meeting, but largely over the incident, not over when to open the markets. Theykey issue was connectivity to the markets and the difficulty in getting 50,000 people towork . At that time, the OE M said they were still looking for anyone who might be aliveand that was taking precedent. Representatives from Verizon, C onEd, and OEM w ere atthe meeting as well.On Thursd ay, No v. 13, M r. Zito said that there was another m eeting at CSFB

where they agreed to open the markets on M onday while conducting a test ru n during theweekend. He said that the main reasons w ere that the first responders needed time to dotheir work, and the need to get connectivity to back-up sites ready. Verizon Center w asthe main problem. Verizon also needed to know where displaced companies wanted tose t up their phones before they could connect them. He said that the NYSE w as NOTdamaged and was able to run effectively.When questioned about air quality, Mr. Zito said the though t that their Hu manResources Dept. had mentioned that EPA had been issuing statements saying the qualityof the air was adequate to bring people to work. He said that the HR person said thatEPA said that the air was within acceptable limits an d there were no concerns.He felt that the NYSE decisions to close the markets went incredibly smoothly.He felt that since th e NYSE management team had recently gone through a crisis(software problem that kept NYSE from opening), this practice session helped them onSept. 11,2001.

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UNCLASSIFIEDCOMMISSION SENSITIVEHe mention ed that there were press conferences on S ept. 12 and 13 and that theywould get the tapes to us. He also said that they w ould p ull together press clips on themarket closure. He gave us the name of Sal Sodano at AM EX w ith whom w e shouldspeak on AMEX's issues that day. He remarked finally how competitors were helpingeach other which showed the gravity of the crisis.Wh en asked if NYSE has a crisis managemen t plan, h e said that there is nothingon paper. They have put in place phone/fax/internet etc in several places in the buil dingin case some floors were lim ited as they were when the blackout occu rred (generator onlywent up to floor 6). He also said that there are 4 exits to get out the trading floor and heshowed us those exits. They are very small stairwells and hard to see in the chaos of the

floor. Mr. Zito took us to the trading floor and showed us the Command center for theChairman of the NY SE to use in the case of an Emergency w hich included direct dials tothe Fed NY, Fed DC , SEC, OC C, etc. The names had not been changed on the phonessince some recent departures (including that of Mr. Grasso) but apparently the numbersremained the same and probab ly work ed. He said that the staff is aware of how to exitand that fire wardens were on each floor. The security of the building is incredibly tightso much so that the interim Chairman John Reed (who w as not in NY C on Sept. 11)suggested that meetings be held o utside the Stock Exchange b ecause it was so hard forguests to get in. M r. Zito said that they consider the NY SE a target and have blocked allaccess on the road. (Mr. Burk hardt had said that they have developed 2 alternate sitesplans for outside lower M anhattan w hich they are working on implementing but so far,their back-up trading floors are in the same build ing and the data centers are locatedelsewhere).Upon departing, the Commission staff asked if it were possible to get both Harvey Pittand Dick Grasso's current phone numbers. W e were given M r. Pitt's number an dsubsequently set up a meeting. W e were told M r. Grasso was unavailable. However,later on Dec. 11, M r. Grasso called Sam Caspersen at his Comm ission office andprovided his version of the events.Attachments:NYSE 2001: A year to RememberNYS E Publication: Let Freedom RingTwo Slides on Technology

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ny b7 nyse fdr- 12-11-03 mfr- roger burkhardt cto nyse 754

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