How the Decision to Close the Exchanges Came Down

The decision to close all equity trading today (and likely tomorrow) came from a series of conference calls between the stock exchanges and the major broker dealers Sunday afternoon into Sunday evening.

How the Decision to Close the Exchanges Came Down
Paul Giamou | Aurora | Getty Images

The New York Stock Exchange initially made a decision to close only the NYSE floor and keep the electronic trading operations open, but in consultation with other market participants a final decision to close everything was made about 9 p.m. ET. The main issue: the safety of the employees.

It was not just an issue of whether the NYSE floor should be open or closed. There are thousands of traders and support personnel that work for brokerage firms in downtown and midtown Manhattan, as well as Jersey City. The employees come from Staten Island, Long Island, Connecticut, upstate New York, and New Jersey.

What do you do with the employees once you get them into their offices, and then can't them out? This is what they were confronting:

1) closed subway system and other mass transit facilities;

2) NYMEX closed because it was in a flood zone;

3) several downtown hotels (where essentially support personnel were being housed) on the verge of evacuation;

4) large numbers of traders not coming in to trade;

5) very thin volume, with the NYSE floor closed; and

6) if anything went wrong there was not a lot personnel to address any problems.

The other issue was the state of the market. There is a big emphasis on market stability and liquidity. To open when the main NYSE trading floor is not open, when most participants are out, and it is not clear how much liquidity there would be, was ultimately not viewed to be worth it.

Bottom line: There were too many risks, and not enough reward to keep everything open.

The major market participants will hold a mid-afternoon conference call to decide whether the markets will be closed tomorrow. My guess is they will decide to keep them closed another day.

—By CNBC's Bob Pisani; Follow Him on Twitter @BobPisani

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