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SIA issues disaster guidelines for unexpected market closures

15 April 2004  |  7833 views  |  0 SIA issues disaster guidelines for unexpected market closures

The US Securities Industry Association has issued guidelines for order routing, clearing, and settling equities and options during an unexpected market close.

The information outlined in the paper provides securities firms, stock markets, industry utilities, and other market participants with a point of reference based on previous unexpected closes. Among the topics it covers are dealing with open orders, locked-in trades, and ex-dividend dates.

John Panchery, SIA vice president and managing director, systems and technology, says the aim of the paper is "to prepare industry participants now before an unanticipated interruption to normal market operations".

During the past 30 years, the US markets have closed unexpectedly nine times, due either to 'unexpected but forewarned' closings such as the death of a president, or 'unexpected and spontaneous' closings, like the recent black-outs or terrorist attacks.

Thomas Quinn, chairman of the DMD working group that drafted the guidelines, says the paper will help market participants anticipate common operational issues during an unexpected crisis.

He stresses: "It does not supplant the decision-making authority of each market and exchange to remain open or decide to close amid an unexpected emergency."

The guidelines would "kick in" once the decision to close is made by each organisation, states Quinn.

The Depository Trust & Clearing Corporation recently published its draft plan to address interruptions in daily processing due to unscheduled closings or a protracted system failure. The plan summarises how DTCC would handle these incidents and also encourages industry participants to assess their own operations.

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