How Securities & Futures Firms 'Weathered' Hurricane Sandy.

[ by Howard Haykin ]

With the damage from Hurricane Sandy still very much in evidence throughout the ocean communities of New Jersey, New York, and Connecticut, FINRA, in coordination with the SEC and the CFTC, is conducting a review of the impact of Hurricane Sandy on firms' operations and business continuity. - i.e., specifically, firms' ability to conduct business at a time when business continuity plans were enacted. 

FINRA asks that selected firms provide written response to the questions below, on or before 12/16/12.

*** General Considerations **** (Offsite Locations, Staff Preparations, Facilities)

1. Briefly describe what sections of firm's Business Continuity Plan ("BCP") were implemented in connection with Hurricane Sandy, if any.  Did firm use locations and/or take actions that were not part of firm's BCP?
2. For each business line deemed critical, how did firm prepare staff before the storm?  What obstacles did staff face during and after the storm, including accessing alternative sites?
3. If firm planned to relocate employees to an alternate site, how many miles away was the back-up site from the main office?  Was the location of this site far enough away from your primary location to avoid the same physical infrastructure problems?  Was it on a different power grid, different central telecommunication circuit?  If staff worked from home, were they able to do so effectively, including adequate system access?
4. Did your alternative site have current data available and the necessary equipment and systems to recover and maintain critical operations or services?  If not, what critical operation or services could not be maintained?
5. Did you have sufficient and adequately trained staff at your alternative site?
6. Is your alternate site able to be used effectively during a prolonged period in which your main facility cannot be used?
7. When did your firm last test its BCP plan?  Please state what was tested as part of the BCP plan.  Was the BCP plan test a partial or full test?  What were the results of the test?
8. Describe any significant problems experienced with vendors or outsourcing providers, including exchanges, clearing facilities, pricing feeds, service bureaus or other regulated or unregulated entities.  Please identify the date when these problems occurred and were resolved.
9. Where were Compliance personnel located and what limitations, if any, were encountered in carrying out compliance responsibilities?
10. How dependent were you on any single telecommunication system or other provider to perform?  What functions does the single telecommunication system or other provider perform?
11. What were the main lessons learned from the recent event regarding the effectiveness of your BCP?  Will your BCP assumptions change? What updates do you plan to make to your BCP given the recent event and lessons learned?
12. Is there anything the industry can do jointly to be better prepared for any future event?

^_*** Trading ^{_{******************}}

13. Where are firm's primary trading locations?
14. Where are firm's alternate trading locations?
15. How many trading staff are located at the primary locations?
16. Does alternate trading location require the physical presence of trading staff from the primary location?  How was the alternate location staffed?  
17. What processes are performed to transfer trading activities from the primary to alternate trading location?  Where/how are these processes performed?
18. How did firm last test trading at its alternate location?  Was testing performed in conjunction with market centers?  Results of these tests?  Does your firm have connectivity to the backup sites of the exchanges or other trading markets to which you send orders?  If so how does such connectivity to the backup sites differ, if at all, from your firm's connectivity to the markets' primary sites?
19. Did firm test the various futures markets electronic trading platforms during BCP testing?  If so, which markets were tested and when.  Describe the scope of test and results of test.
20. Was your firm ready to trade on A90RCA (?) as the primary NYSE market at the opening of business on Monday morning, 10/29/12?  If not, what issues would have prevented you from trading?  Did you previously participate in testing of the "Print as N" initiative?  If so, when and what were the results?
21. Had firm participated previously in the testing of BCP plans for exchanges or other trading markets - e.g., ATSs - other than NYSE?   If so, when and what were the results?  If not, has your firm previously been offered the chance to participate in the testing of such BCP plans but decided not to participate?
22. What testing does firm conduct to ensure that BCP systems - including Order Management Systems and Execution Management Systems - function to mirror all regular trading workflows?
23. What is firm's capability to trade products remotely?   To what extent can firm operate from its alternate trading location - e.g.,  percentage of its trading staff?  Full operation or partial resumption of business?   Describe how firm defines a partial resumption of business - i.e., would firm be limited in the products it could trade, the percentage of markets that could be made, etc.)?
24. Prior to Hurricane Sandy, when was the last time trading occurred from the alternate trading location?

^_*** Customers ^{_{******************}} 

25. How were communications with the firm's customers impacted during the contingency event?  If alternative communication efforts were utilized, what were they and were they effective?
26. Did customers have access to their funds at all times?  Were customers able to fully engage in transactions when the securities and futures markets reopened?  How does the firm generally receive orders from its customers?  Did the firm experience issues receiving orders from its customers?  If so, when was this problem rectified?

^_*** Financial / Regulatory ^{_{******************}} 

27. What if any regulatory relief was required and requested?  Include dates of requests, the entity to whom relief was requested - e.g., SEC, FINRA, CFTC, NFA - and whether such relief was granted.
28. Did firm experience settlement issues, securities or futures, during the week of 10/29?
29. What issues did firm have with its banks, DTCC, or futures clearing exchanges, if any - e.g.,  clearance of securities and futures, margin, pricing, etc. - and how were they resolved?
30. Did firm experience issues with its books and records during the event or thereafter, and how were they resolved?
31. How is compliance with financial responsibility rules factored into the firm's BCP?

Thank you for your anticipated responses.

To access the referenced story, go to:   [FINRA Targeted Exam Letters, 11/20/12].