Wall street has been preparing for Y2k (WSJ)

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Wall St. Has Been Preparing for Y2K Thursday, December 23, 1999


Wall Street is mobilizing for Y2K with measures ranging from the sublime to the ridiculous. So far, the securities markets generally have sailed through the first half of December without any signs of disruption. But securities firms have been focusing on minimizing the impact of possible problems, stemming from the difficulty some computers may have in recognizing the new year as 2000 instead of 1900, in the U.S. and abroad when the big moment arrives. Most big firms have held multiple "dress rehearsals," including "let's pretend" Y2K scenarios from subway outages in New York City to a surprise bank holiday in Tokyo to civil unrest in Indonesia. One fear is that some combination of power or phone outages could prevent some big customers from sending extra cash or securities needed to keep their debt-financed positions current, forcing sales that cascade through markets. The exchanges and securities firms have held a series of computer-system tests throughout 1999, which generally have gone smoothly. Still, some of the precautionary measures being taken are substantial. Morgan Stanley Dean Witter & Co. will be using a command center at a back-office site in Brooklyn because its headquarters at the north end of Times Square, where a million or more revelers are expected to throng, will be closed due to the crowd. And several firms including Merrill Lynch & Co. and Charles Schwab Corp. plan to have their branch offices open during the day on Saturday Jan. 1 and Sunday Jan. 2 -- when the offices are normally closed along with the financial markets -- so customers can come in and make sure their money is still there. Some of the less-momentous measures reflect the scope of possible problems that securities firms are trying to imagine. The lobby of the headquarters of Donaldson Lufkin & Jenrette Inc. at 277 Park Ave. in Manhattan will have portable toilets set up on the Lexington Avenue side of the building in case the water supply is cut off. At Lehman Brothers Holdings Inc., executives will restrict outside access to the firm's e-mail system a few days before Dec. 31, a spokesman says, as a precaution against hackers "using the millennium as an excuse to create havoc." First Data Corp., a credit-card processor in Atlanta, has stocked up on 30,000 gallons of extra water to air-condition its computer centers in case public water supplies are disrupted for more than a week; it has also purchased 50 satellite phones. Guy Battista, senior vice president of technology, says that on Friday morning, Dec. 31, he like many financial-services executives will be watching New Zealand and Australia, which will be the first to greet the new year, to see how the changeover goes. J.P. Morgan & Co. has had three dress rehearsals since October encompassing roughly 140 different year-2000 scenarios, including "client counterparty failures, payment-system breakdowns, public unrest -- everything you could imagine that could possibly go wrong," says Paula Larkin, the firm's year-2000 program director. The Securities Industry Association helped organize a "Year 2000 U.S. Financial Services Coordination and Communications Center," which opened for business on Dec. 20 and will run through at least Jan. 7. At a briefing for SIA members in November, Merrill Lynch Senior Vice President Arthur Thomas described the center as a "central information source for broker-dealers, asset managers, banks, mutual funds and other financial-services entities." He says it was aimed partly at forestalling "unnecessary panic" over unfounded rumors by conducting regular news briefings, but would also report serious problems to regulators in Washington. Merrill, which ran an eight-hour dress rehearsal in November and a three-day simulation this month, will have a helicopter and a jet aircraft on standby at the Teterboro, N.J., airport. In case some of its data processing has to be shifted from lower Manhattan to backup facilities. Chase Manhattan Corp. has reserved extra armored cars for cash-machine restocking. Not all Wall Street firms will be open for business. Retail branches at Morgan Stanley Dean Witter will remain closed until Monday Jan. 3. And the Salomon Smith Barney unit of Citigroup has left the decision to "the discretion of the branch managers." Banks including Citibank, Chase Manhattan and BankAmerica will be closed as well, except for BofA banking centers within retailers that routinely stay open weekends. But Schwab is taking Y2K so seriously it will deploy a special "Millennium Force" of about 1,000 extra employees to staff its 24-hour-a-day customer-service phone line. Schwab plans to keep most of its 335 offices open Saturday Jan. 1 and Sunday Jan. 2 from 9 a.m. to 5 p.m. "We just believe it's a time when people are going to be checking their balances and their accounts," says Schwab spokesman Greg Gable.

-- Homer Beanfang (Bats@inbellfry.com), December 23, 1999

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