This week, Inside Market Data travels to Hong Kong -- a city well-versed in handling typhoons and tropical storms -- for the Asia-Pacific Financial Information Conference with industry association FISD. But in the wake of Hurricane Sandy's destructive assault on the US East Coast -- much less used to dealing with the aftermath of such storms -- we appeal to those readers fortunate enough to have resources to share with those who don’t; to those who have room, to take others in; to those who have time, to volunteer; and to those who can afford it, to give generously at redcross.org, by phone at 1-800-RED-CROSS or by texting REDCROSS to 90999.
The sight of parts of Manhattan—the island at the center of the world—still without power, water, or heat as the temperatures drop; contaminated water for those that have it in some counties; homes in New Jersey swept away by Sandy’s fury; and a rising death toll daily must impress on us all how fortunate we are that these circumstances only arise after catastrophes, rather than being a way of life. Every topic covered by this publication is predicated on a certain level of market sophistication and reliability—power, infrastructure, skills, availability of technology—that depends on New York and its surrounding area not being subject to the same challenges as third-world countries.
For an industry used to moving markets in microseconds, it must have been especially frustrating to watch last week’s slow approach of Hurricane Sandy, knowing that there was no way to prevent it, and the only actions possible—moving people and property as far out of Sandy’s path as possible—would be a painfully slow process, inevitably resulting in a tragic human and financial cost. So is there a way we can apply the speed and sophistication of technology used in financial markets to events such as Sandy?
Market structure expert Patrick L Young, who last week joined the board of datacenter operator Data City Exchange, offers an interesting conundrum on weather phenomena: “The trouble with weather forecasting is that it’s right too often for us to ignore it, and wrong too often for us to rely on it.” In the case of large storms like Sandy, the existence of the storm isn’t in doubt: where opinions may differ would be around the potential path and impact—for which models already exist (and reliably predicted Sandy’s direction, based on interaction with other weather fronts, as well as the resulting storm surges of water).
Imagine being able to determine the potential impact to such a degree that evacuations could begin earlier and could be prioritized more effectively, aid could be sent sooner—or applying the same data and models already used to predict supply and demand in securities to retail purchases so suppliers could divert inventory ranging from wood and nails to dry goods and water from warehouses to stores closest to areas about to be hit. Sure, retailers already do this to a degree—but now it’s time to take this to the next degree. Also, imagine applying the finance industry’s stress-testing experience to testing building designs against likely storm types. Big Data is a big deal right now, and the financial markets attract some of the smartest people in the world, so let’s harness that. Will it cost money? Of course, but firms and vendors will surely want to build these models anyway, for their potential value to commodities traders or insurers. And the benefits could far outweigh the cost. Imagine being able to stay open while your rivals were unprepared for water damage; imagine your staff being able to make it to work without interruption; imagine saving not just profits but lives.
To encourage innovation that benefits not just the financial industry but also a much broader community, we’ll introduce a new award next year—let’s tentatively call it “The Above and Beyond Award”—to recognize those who use their expertise to make a real difference on people’s lives, not just their bottom line.
But until then, there’s a different bottom line that desperately needs support: Firms’ downtown offices may need refurbishment, but many in New York and New Jersey need much more right now. So now that the work to reopen the exchange floors is complete, please give generously so the task of rebuilding floors, walls and roofs can begin.