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Drawing a lesson from the way financial services recovered from the Sept. 11 terrorist attacks, lawmakers who oversee commerce and trade this morning called for greater dispersion in the nations communications networks.
“It has become more obvious since the attacks of Sept. 11 that decentralization in this country is good,” said Rep. Clifford Stearns, R-Fla., chairman of the House Subcommittee on Commerce, Trade and Consumer Protection. “Mirroring the advantages of our population distribution, the Internet also uses an assortment of distinct connections to ensure performance even when certain locations are troubled.”
At a hearing focusing on financial service electronic communications networks, Stearns and other members of the subcommittee emphasized the cooperative work between industry and government in reopening the trading markets after just four business days down. “This is a model for future public/private undertakings,” said Edolphus Towns, D-N.Y., ranking minority member of the subcommittee.
In the financial services arena, “electronic communications networks” denote private networks used to facilitate equity trading. Because they do not have a specific trading location, they are less vulnerable than traditional exchanges to physical attacks like that of Sept. 11. Several officials from the industry testified before the subcommittee, describing the need for greater decentralization, backup connectivity, redundancy, and contingency planning.
Istinet Corp., an electronic securities broker that had facilities at the World Trade Center, lost connectivity to approximately one-third of its customers in the aftermath. To minimize the loss in case of a future attack, the company is increasing the number of backup connections it has with each of its customers, said Joel Steinmetz, senior vice president at Istinet. He added that the tragedy illustrated the resilience of networked communications systems compared with more centralized systems.
“More decentralized financial markets like currency markets and bond markets suffered disruption equal to or greater than the stock markets, but were able to resume trading more quickly,” Steinmetz said.
Officials from more traditional financial services, including the New York Stock Exchange Inc., assured lawmakers that they are taking steps to be better prepared for attacks. The NYSE has made the necessary investment to open a fully equipped alternative trading floor on shorter notice, according to Catherine Kinney, group executive vice president of the NYSE. “The alternative facility could be operational within 24 hours if any future attack rendered our trading floor unusable,” Kinney told the subcommittee.
Steven Randich, CIO and executive vice president of operations and technology at The Nasdaq Stock Market, outlined the many layers of redundancy in place to withstand disruptive forces. The Nasdaq connects to “virtually” all firms though several Nasdaq servers at their sites and in backup centers, and each server in the network is connected to two distinct network centers using different service providers, he said.