Sticking to His Guns

By Larry Dignan  |  Posted 2003-09-10 Print this article Print

Foresight kept the trading exchange in business for the last two years.

Sticking to His Guns

In the early 1990s, Gambaro couldn't get the backup center approved on his own, but the NYBOT board commissioned a study on the idea by Deloitte & Touche. Deloitte supported Gambaro's arguments and added a key financial element: NYBOT would lose $350,000 a day and its customers would lose $3.5 million a day, if its Trade Center base went down.

The foresight to create a backup trading floor and business continuity plan has made Gambaro, former chief information officer at NYBOT, almost a celebrity in technology circles. Gambaro has endeared himself to floor traders, who have been able to feed their families because of his tenacity.

"It was an adjustment coming here and I'm still getting used to it," says Vito Moscato, 71, a reporter on the floor who matches up trades in the pits. He's worked for NYBOT since 1957. "We're just lucky to be here."

The Long Island City site wasn't always viewed as an oasis. Even after getting approval from top management to fund the disaster recovery site in 1995, Gambaro was questioned nearly every quarter over whether the NYBOT, then known as the Coffee, Sugar and Cotton Exchange, needed a backup trading floor at a cost of $200,000 a year.

Gambaro, a former member of the U.S. Army Rangers, a small, highly trained unit used for special operations and reconnaissance surveillance, stuck to his guns. The site now costs about $330,000 a year to keep idle—an expensive insurance policy. It costs $1.2 million to operate as a full-fledged trading floor.

"The board spent the money on it, but the challenge was keeping it as time wore on. The argument was that you never die until you cancel your life insurance," says NYBOT President and CEO Charles Falk.

But paying for the space was not all that NYBOT did to keep ready. Every six months NYBOT members and staff drilled, testing procedures for moving operations to the alternate site in case of disaster. The exchange also tested the backup site every three months. Such a test was scheduled for Sept. 18, 2001.

The continuity plan was about half the size of the Manhattan phone book, and designated which employees were to report to the backup site and which ones were to work from home.

The plan accounted for everything except for the complete loss of Four World Trade Center. Yet that was the emergency actually faced.

Initially left with two trading pits—circular areas where traders swap contracts—and a mere 6,000 square feet of space at the Long Island City facility, NYBOT shortened trading sessions of four to five hours down to 90 minutes and made traders rotate shifts. Later, NYBOT spent $5 million to double the size of its Long Island City location to allow for cocoa, orange juice and sugar trading, and it added a trader lounge.

Before trading got started on Sept. 17, a Saturday test run revealed the telephone switch serving the Long Island City site didn't work properly. In a city where connections count, it was lucky that a Gambaro cousin worked in former Mayor Rudolph Giuliani's administration, which had designated opening the NYBOT one of its priorities along with the New York Stock Exchange and New York Mercantile Exchange. Gambaro contacted Verizon through Giuliani to get the switch fixed that Saturday. NYBOT also bought 250 cell phones for its traders, as insurance.

Verizon got the switch running, but once trading opened, it became clear the Long Island City phone system was still a handicap. Traders were each using two phones to conduct business—but were used to four to six phone lines each. The newly repaired Verizon switch would melt down if more lines were added.

After a quick call, Giuliani's administration arranged for an Army helicopter to lug a new 1,200-port Siemens switch—roughly the size of a computer rack—from St. Petersburg, Fla., to New York. It took four days to install the switch, much faster than the usual 30 to 60 days, says Gambaro. By time trading opened Sept. 24, traders had booths with six phone lines as requested.

Now, the move back downtown means Moscato will have an easier commute from Bayonne, N.J., and can avoid the New York City subway system.

At NYBOT's new home, employees like Moscato will have the opportunity to use technologies that were introduced at the backup site, but haven't been adopted widely. For example, NYBOT is encouraging its members to use a wireless handheld system to make trading more efficient.

Business Editor
Larry formerly served as the East Coast news editor and Finance Editor at CNET News.com. Prior to that, he was editor of Ziff Davis Inter@ctive Investor, which was, according to Barron's, a Top-10 financial site in the late 1990s. Larry has covered the technology and financial services industry since 1995, publishing articles in WallStreetWeek.com, Inter@ctive Week, The New York Times, and Financial Planning magazine. He's a graduate of the Columbia School of Journalism.

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