Equity markets around the world, and not just in the US, have been reeling since September 11, but dealing systems remain intact. The shocking removal of the world’s largest participant from the scene meant that many challenges had to be faced.
Many institutional investors turned to Frankfurt, in reaction to events. “There was no big hike, but we saw reasonable volumes on the system. What was encouraging was that the systems held up very well,” said Uwe Velten at the Deutsche Börse.
Clearstream were able to confirm this. “Despite the tragic events we were pleased to see core business activity was unaffected and processing continued in every way shape and form. The only effect we suffered was that our New York customer service office was in the World Trade Centre. Fortunately all our colleagues are safe, and once that was confirmed we covered the situation from our offices in Brazil, Mexico and London. Core processing business is, however, in Luxembourg, and this was unaffected, and almost a perfect example of our business continuity,” said spokesman Graham Cope.
Jon Abbink, head of research at Van der Moolen & Co in Amsterdam, commenting on Euronext said: “Trading was quite volatile on the actual day, and in terms of volume was among the heaviest days of the year. For the rest of the week it dropped to a more normal level. One has to remember that a large number of Dutch stocks are traded in New York, and if there was interest in the US then that volume has to go somewhere.”
Abbink confirmed that the platforms held up, indeed performed better than in recent weeks. “As you know we had a few problems at the beginning of September. Our change-over is getting to the stage where in Amsterdam occasionally some of our systems are not robust enough to stand up, but in the wake of the events in New York we had few or no problems.”
He believes that if problems had been more severe, such as settlement problems in European shares, than there could have been major difficulties. “New York seemed, however, to get the systems up and running pretty quickly.”
One exchange was in a particularly difficult position. NASDAQ was missing a significant number of its major players, and with telecommunications in New York under a lot of pressure, trading was extremely volatile. Consequently the market behaved worse in terms of pricing and operation than open outcry operations.
Mike Young, head of equities at Goldman Sachs, says the events of last month were sufficiently unique as to make it impossible to draw any concrete conclusions for the future. “In terms of global correlation it was more a matter at looking at how sectors performed. That is what influenced how the indices reacted. In fact it was a pretty uniform fall across Europe, and when comparisons are made with long bonds, then again we see consistent results. We saw a move to defensive stocks, which was inevitable, with an exit from cyclicals. That situation may well reverse as events unfold.”
He confirms that trading was significant rather than symbolic, and believes this shows the ability of the markets to react to such dramatic events. This was also an exercise in risk management, he says, and a measure of the sustainability of the markets themselves.
Monika Rosen at Bank Austria in Vienna said, “One of the main things was that the systems worked, and it was an important message that the markets could not be de-stabilised. Although they fell in the first few sessions, of course, and I imagine volatility will remain the name of the game for the immediate future. The stimulus which has taken place via interest cuts and the budget spending plans which are being put in action will benefit markets further down the road.”
She points out that certain sectors behaved as expected, that is airlines and reinsurance companies were badly hit, whilst gold and oil benefited. “Defensive stocks are being sought, and that is a continuation of the past year.” She reiterated that longer-term cyclical stocks could well benefit.

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