Can the floor of the NYSE really shut down? Volatility is not the word to describe the current market index skydives, but the onset and instability of the novel coronavirus (COVID-19) has made this an uncertainty of the day. Investors have much anxiety over a global recovery from COVID-19 as its effects will take a significant time to recoup. President Donald Trump’s payroll tax cut for the airline, travel, and cruise line industries was a potential fix, but it certainly falls short. El Al has suspended 80 percent of its workforce with unpaid leave, and the IRS is deliberating extending the April 15 income tax deadline, something previously only done for select areas experiencing a natural disaster. The stock market is not the economy, but recently investors have sold shares and fled to government bonds, gold, and short-term Treasury bills to avoid virus setbacks.
Stacey Cunningham, the president of the New York Stock Exchange, is in the thick of the action these days. She has been named one of the 100 most influential women in American finance by Fox Business on the Barron’s inaugural list honoring the movers, shakers, and agenda makers throughout the finance industry for their leadership and achievements. Businesses across the country have been preparing coronavirus contingency plans. What would happen if the exchange opted to keep traders at home in response to the contagion? Cunningham explains that there are scenarios already in place and action available for release if the need were to arise. “We are prepared to close the floor over coronavirus if necessary,” Cunningham revealed in a Fox Business interview.
Quarterly tests are conducted to ensure that market participants can interact remotely. The most recent test, on this past Saturday, March 7, may prove to be the final before a real-life situation unfolds. It is rare that glitches occur on the market floor, but they often befall moments of severe shakiness. Our current exchange has experienced much less failure due to technology scaling the market conditions. On Monday, March 9, the market’s circuit breakers triggered a 15-minute halt for all US markets. This resulted in the biggest one-day percentage decline since the 2008 subprime mortgage disaster. The day ended in a drop of over 7% across the three major American markets – the S&P 500, the Dow Jones Industrial Average, and the NASDAQ Composite – with the energy sector losing 20%.
The most notable market halt lasted a week, following the assassination of US President Abraham Lincoln. Then, just eight years later, the closure of Jay Cooke & Company banking enterprise in Philadelphia left the market floor barren for ten days. To conserve resources and securities at the start of World War I, the market was closed for four consecutive months. It was not until what became known as “Black Monday,” on October 19, 1987, that the market experienced another tumultuous happening. Although the market did not close, it dropped 22% and led to the formation of preventive measures. A decade later, the market closed due to these implementations when a 30-minute delay on October 17, 1997, began after a 350-point drop, and later another 200-point decrease forced the market’s closure.
The September 11 attacks began a week-long hiatus from trading, only to be followed by a 7.1% nosedive when it finally reopened. In the summer of 2015, an unexplained technical glitch shuttered the market for hours. It was not until this past Monday that these fears were again realized amidst a chaotic ordeal. We are within a 20% regression in oil prices and seeing lower interest rates on treasuries coupled with coronavirus fears on a global scale. The broader market sell-off is being felt from banks to transportation and shipping entities, as well as energy stocks. In the US, companies like IBM, Target, JPMorgan Chase, and Amazon are suspending “nonessential” international and domestic travel, large conferences like SXSW have been canceled, and many companies, large and small, are organizing work-from-home policies.
Vacations abroad and cruises, especially Pesach getaways, are being altered. The highest rate of market message exchange takes place on the NYC floor especially when investors begin to get jittery. The next time the market can close would be for 15-minutes if there is a 7% drop on the S&P 500; it would then be followed by another 15-minute halt if the market falls 13%. A 20% decline closes the market for the day. The NYSE prides itself on being able to maintain its confidence. Explained Cunningham, “The markets are not always going to go up, but we need to make sure they always work.” The state-of-the-art platform ensures that its customers get the same type of familiarity when orders are placed, without delay, no matter the current ongoing.
In the male-dominated NYSE, Cunningham led as a specialist on the floor and tells young women vying to join the finance field to “be yourself.” Cunningham continued, “What makes you different makes you even more unique to a special organization.” Diversity is the buzzword of the day that enhances any business and makes it a stronger entity. Today, the market is simply digesting lots of news from general feelings of the coronavirus to the 2020 presidential election, and it is reacting accordingly. The market acts like a human being and builds resiliency by remaining calm to navigate its uncertain waters. Causation changes, but this time is not different.
Some companies do not go liquid immediately, opting to build a massive war chest before entering a public space, and they often fall short. Public companies demand extreme discipline and governance. Diffraction of wealth is a prerequisite for the success of a company in our nation. Capitalism in turn needs a tune-up, and the NYSE has been the engine to control the country since its inception 203 years ago. Private companies cannot be allowed to become too much of the potion for the success of the story, and as a nation we must share the success with the public.
A direct listing is open to everybody at the same time without an artificial constraint of buying limits and selling restrictions. Here, buyers and sellers set the price, representing price discovery at its finest. It is the market itself that is given the ability to power through moments of stress. Investors are limited to access to the fastest growing companies, and are led to evaluations where buyers and sellers have not united in a fast-paced liquid environment, so they do not fully represent the company’s value at a fully functioning level.
The White House and public health officials differ in their opinions as the health department aims to paint a realistic picture for the public, and the president continues to minimize its effects showing what appears to be a lack of concern for each breaking development. The president reproved New York Governor Andrew Cuomo, who has been at the forefront with New York City Mayor Bill de Blasio, delivering regular updates, calling his statements, “mixed messaging,” and blasted the Democrats for turning the virus into “political weaponization.”
“The Fake News Media and their partner, the Democrat Party, is doing everything within its semi-considerable power (it used to be greater!) to inflame the coronavirus situation, far beyond what the facts would warrant. Surgeon General, ‘The risk is low to the average American,’” Trump tweeted.
By Shabsie Saphirstein
