Technology -- Essential Yet Vulnerable:
How Prepared Are We for Attacks?
September 26, 2001
New York Mercantile Exchange
Subcommittee on Government Efficiency,
and Intergovernmental Relations
Mr. Chairman, my name is Mark Seetin. I am Vice
President for Government Affairs for the New York Mercantile Exchange
("NYMEX" or the "Exchange"). On behalf of the Exchange,
I want to thank you and all the members of the subcommittee for the opportunity
to participate in today's forum concerning vulnerability of information
technology to attack and preparedness should attack occur.
NYMEX is a Global Energy Marketplace
The New York Mercantile Exchange, ("NYMEX"),
established in 1872, is the world’s largest energy futures exchange. Daily
trading volume is 3-5 times world oil production and 5-7 times North American
natural gas production. For the past three decades, NYMEX, a public, regulated
market, has brought transparency, competition and efficiency to energy
markets, and allowed consumers and business the financial tools to deal
with market uncertainty. The transparency of NYMEX prices, and the integrity
of its markets, makes NYMEX a visible and reliable benchmark for energy
pricing which is vital to our economy.
The visible and highly competitive daily bidding
of energy futures and options on the exchange provide a true world reference
price for each of the commodities traded. During the uncertainty and volatility
that characterized the world oil markets during the Persian Gulf War in
1991, NYMEX played a leading role in insuring against financial adversity
through its secure liquid market.
The September 11 Terrorist Attack on the World
NYMEX is located at the World Financial Center,
within yards of the tragic events of September 11. In fact,
NYMEX was the first New York exchange to resume operations, with a trading
session on its internet market known as eACCESSsm on Friday,
September 14 from 2:30PM to 6:00PM. After five days of "around the
clock" work to clean, secure and repair the building, floor trading
resumed on September 17th. NYMEX takes seriously its responsibility as
a price indicator for energy, and devoted full effort to the task of resuming
Were we Prepared?
Given the nature and scope of the September 11
attack, it is difficult to believe anyone in the financial district had
contemplated such an event in the process of disaster planning. Nevertheless,
the Exchange reacted quickly, calling on experience gained in the 1993
bombing, at which time we were located in 4 World Trade Center, now crushed
in the rubble of the collapsed buildings. Unfortunately, the building
collapse also damaged our backup computer system located at 22 Cortlandt
Street, just across Church Street from the WTC.
Emergency Response—Basic Necessities
Perhaps the single most valuable item in carrying
out our response to the crisis was the corporate "Emergency Contact
List," which contained telephone, fax, home and cellular telephone
numbers of the Board of Directors and senior staff. Also essential to
the process was the compilation of telephone, fax, e-mail, and cellular
contacts in federal state and local emergency management agencies and
law enforcement. The frenetic process of preparing to resume business
demanded numerous calls to all of those named agencies on a twenty four
Plan Implementation—Board and Staff Take Action
Within three hours of the attack and subsequent
evacuation of the Exchange building at One North End Avenue, NYMEX Chairman
Vincent Viola conducted the first of several emergency board meetings
via conference call. Subsequently, a "Crisis Recovery Headquarters"
was established at a mid town Manhattan hotel, from which the board and
staff implemented recovery efforts.
The Plan – Get Back in Business ASAP
As the world’s primary energy futures marketplace,
the very events causing our distress were driving our market participants
to press for resumption of trading. After considering a wide range of
alternatives, the board decided to resume energy trading by Friday, September
14, by utilizing the Exchange’s electronic after-hours trading system,
eACCESSsm for an extraordinary daytime trading session lasting
from 2:30 p.m. to 6 p.m. Our electronic trading system had recently been
migrated from a closed "frame relay" system to an internet based
trading system. Technical support staff were relocated to a site in New
Jersey, from which the system could be managed. The clearing system remained
in the building powered by back up diesel generators installed when the
facility was constructed in 1997.
The NYMEX website was the central point of contact
with the public, trading firms, and employees. Instructions were posted
on the website to inform traders regarding the special Friday electronic
trading session. A customer service center 800 number was posted on the
website to provide for more detailed assistance.
Simultaneous with the effort to reopen the marketplace
on Friday with our electronic system was the Herculean effort to clean,
restore, inspect and certify the building in order to resume open-outcry,
or "pit" trading at 11:00 a.m., Monday, September 17. Movement
of personnel and equipment was very restricted in the "hot"
zone surrounding the WTC. A police escort and a permit was required to
go to and from our building. Further complicating the process was the
need for us to coordinate police and security escorts for telephone technicians.
In spite of the hurdles mentioned earlier, and
many unexpected additional ones including the Saturday night failure of
a fuel system component in one of the backup generators at the building,
we accomplished our goals and received official approval late Sunday afternoon
to re enter the building for the purposes of resuming business at 11 a.m.
Monday. This almost unbelievable accomplishment could not have occurred
without the unwavering determination of NYMEX Chairman Vincent Viola,
President J. Robert "Bo" Collins, a staff of dedicated employees,
and a tremendously responsive governmental emergency infrastructure. The
Federal Emergency Management Agency (FEMA), New York State and City offices
of emergency management, law enforcement agencies, and the military were
tireless in their response to our urgent requests. The White House, governor’s
office, mayor’s office and federal and state level elected officials were
very responsive to our needs. Finally, our regulator, the Commodity Futures
Trading Commission ("CFTC") was tremendously supportive and
What Have We Learned?
Perhaps the most important part of any disaster
response plan centers on communication. It is absolutely essential that
you have your resources – including leadership, staff, and vendors identified,
and have the ability to communicate with them. For a business involving
customer service, such as ours, the ability to use our website and 800
numbers to communicate and answer questions was essential. Communication
with governmental emergency authorities and law enforcement and timely
assistance from them in addressing needs is the "third leg"
of the communications stool which is required for any emergency response
plan to be effective.
While NYMEX re opened the energy marketplace within
days of the disastrous terrorist attack, full recovery from the events
will take time and money. Just a few of the ongoing obstacles we face
include the following:
Transportation–the lack of surface
access has limited the commuting of staff and members of NYMEX to water
shuttles and has forced the Exchange to fund this emergency transportation
system. Without the availability of traders to provide liquidity and volume
in the marketplace, it fails to adequately perform its strategic purpose
of price transparency.
Environmental Cleanup–NYMEX has undergone
a costly full environmental cleanup effort.
Utilities–With the failure of the
lower Manhattan electricity grid, NYMEX has had to obtain and rely upon
several layers of backup generation to keep its markets open. Equipment,
fuel, personnel and maintenance cost of backup generation is enormous.
Security–the events of September
11 plus subsequent threats have created new and unprecedented security
With the eyes of the world focused on the Middle
East and with the potential for military actions in the future, it is
absolutely critical that our vital energy markets remain open and accessible.
NYMEX and its members are working diligently to ensure the
continued strength and liquidity of our energy markets, as well as the
solidarity and vitality of the New York community and that of the entire
Once again, Mr. Chairman, thank you for the opportunity
to appear before your subcommittee.