Trillions of dollars of stock certificates are feared ruined after Hurricane Sandy flooded a vault at the Depository Trust & Clearing Corp, the Wall Street-owned organization that manages important parts of the U.S. trading infrastructure.
The DTCC houses 1.3m paper certificates for shares, bonds and other financial instruments, including foreign securities, at the organization's headquarters in Manhattan's financial district.
As businesses in the affected areas continued efforts to pump out flooded basements, the DTCC admitted on Thursday that its vault remained underwater and officials had still not been able to assess the damage.
"The building itself remains inaccessible and will be until power is restored and an on-site health and safety inspection can be completed," it warned in an email alert to its clients. It has suspended processing of physical certificates for an indefinite period.
Adding to the confusion, the DTCC also said that it was still trying to track down certificates that were in the mail over the period of the storm. Couriers are experiencing disruptions of their own and could take several days to reroute deliveries to DTCC's alternative sites.
A spokeswoman added that it had electronic records of all the certificates, which could be reissued. "Hindsight is 20/20. We have taken a lot of precautions, in terms of protection both for the security of our systems and of our records, and we have a full inventory of the certificates, as well as a robust recovery plan."
DTCC is used by the financial industry for clearing and settling trades, and it houses stock certificates so that they do not usually have to be posted around the country from investor to investor. The vast majority of trades are now recorded electronically without certificates moving at all.
The organization said that it switched its systems to back-up servers and was dealing with electronic trades as normal out of offices in Dallas, Texas, Tampa, Florida and Brooklyn, New York. More than 1,000 of its New York employees are working from home.
In recent years, the DTCC has spearheaded an effort to encourage electronic-only share and bond issuance, so the proportion of securities that exist in paper form has declined. The organization has further encouraged the process by encouraging "dematerialization", where certificates are converted to electronic format.
In a white paper earlier this year, it said that it cost the financial industry almost $300m to replace $16 billion of certificates that disappeared in the collapse of the World Trade Center in 2001.