Fire Delays Trading at the Big Board and Amex

A transformer fire beneath the building that houses the computer system for the New York and American stock exchanges caused a 90-minute delay in the start of stock trading around the country Thursday.

It was the third time in just over a year that a fire or power outage disrupted New York Stock Exchange trading and hence prevented trading in NYSE-listed stocks or related options and futures contracts on all other U.S. exchanges.

The need to substantially delay trading for a third time prompted an angry response from the Securities and Exchange Commission’s division of market regulation. Richard G. Ketchum, the division’s director, said in a telephone interview that “this has happened too many times in the last year or so.” He said the SEC staff plans to discuss the chain of failures with the NYSE.

A New York City Fire Department spokesman, Frank Martinez, said the fire and subsequent explosion occurred in the predawn hours in a transformer owned by Consolidated Edison Co., the New York electrical utility. The transformer is in a vault beneath the sidewalk of the building that houses the computer system of the Securities Industry Automation Corp., a joint venture between the New York and American stock exchanges that handles the automated aspects of trading and disseminates minute-by-minute stock price information around the country.

Martinez said flames shot up eight stories and blew out windows on three floors of the 54-story building. The fire was put out quickly, and Con Edison said power to the building wasn’t disrupted. But trading had to be delayed because of fear that the fire might have spread toxic chemicals known as PCBs (polychlorinated biphenyls) throughout the building. Employees were forced to evacuate the building and weren’t permitted to begin returning until about 10:30 a.m. Eastern time, an hour after the market’s usual opening time.

A spokesman for the New York City Department of Environmental Protection said tests turned up no sign of PCB contamination in the building.

Richard Torrenzano, NYSE’s chief spokesman, said a complete backup system with duplicate computers is under construction in Brooklyn and is due to be completed in 1992. “Had that site been fully operational today, this problem would not have occurred,” he said.

In November, 1989, an electrical fire beneath the same building at 55 Water St. in Manhattan delayed the start of trading for an hour. Last month, a circuit failure in NYSE-owned equipment caused a 90-minute halt in trading. Last August, a fire in a Con Edison power substation halted trading on the Amex and five futures exchanges but didn’t affect NYSE trading.

Despite the delayed opening, volume on the New York exchange was 102.9 million shares, up from 78.7 million shares traded on Wednesday. The Dow Jones industrial index closed down 11.63 at 2,625.50.

Regional stock exchanges, including the Pacific Stock Exchange, which make markets for NYSE-listed stocks, also delayed opening for 90 minutes because there was no way of reporting price data nationally. One regional exchange, the Midwest Stock Exchange in Chicago, asked the SEC for permission to open on schedule but was turned down. The Midwest exchange would like to act as a backup for the New York exchange in the event of trading halts and has filed a proposal with the SEC to transmit price data nationally through an alternative method using the computer system run by Quotron.

Ketchum said the SEC is reviewing the Midwest’s proposal but has some reservations about whether “it is desirable to have a market up when information is being provided through only one vendor (Quotron).”

Several securities firms, including Los Angeles-based Jefferies & Co., offered to make markets in NYSE-listed securities for institutional investors before the Big Board was able to resume trading. But the SEC sent out a request asking them to stop. Jefferies and several other firms regularly make market for stocks during hours when the exchanges are closed. But Ketchum said an SEC rule about price reporting in effect bans off-exchange trading during regular market hours when the exchanges don’t open. Several firms, including the New York brokerage firm Donaldson, Lufkin & Jenrette, said they did make a market briefly for institutional clients but stopped when they received the SEC request.