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Congressman Stephen Horn, R-CA Chairman

Oversight  hearing on

"Information Technology -- Essential Yet Vulnerable:
How Prepared Are We for Attacks?

September 26, 2001

Testimony of 

Mark W. Seetin
Vice President
Governmental Affairs
New York Mercantile Exchange

before the 

Subcommittee on Government Efficiency, 
Financial Management 
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 Trade Center

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 operations.

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 hour basis.

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 cooperative.

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 demands.

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 United States.

Once again, Mr. Chairman, thank you for the opportunity to appear before your subcommittee.








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