“In the aftermath of the Sept. 11 terrorist attacks, the New York Stock Exchange and the Nasdaq Stock Market have held high-level talks to develop a disaster plan in the event that one of the markets gets knocked out of business,” writes Kate Kelly in today’s Wall Street Journal

“The discussions, which have taken place within the last week, are aimed at sorting out how the NYSE and Nasdaq could trade the other’s securities in case of a future emergency, according to two people familiar with the talks. The goal has been to pen a memorandum of understanding that would spell out precisely how that would happen. No document has yet been made final, these people say.”

“Ensuring that the stock markets remain open emerged as a paramount concern in the days following the terrorist attacks, as Bush administration officials pushed to reopen the financial markets as a sign that the country was on the path to recovery. The fact that the markets stayed closed for four business days — the longest unplanned hiatus since the Depression — led to some initial differences of opinion between political leaders, who wanted them opened immediately, and New York City officials, who were dubious that the city’s strained road and phone systems could handle a return to work.”

“Although the latest plan is still in its earliest stages, it could run up against myriad technical and operating questions, ranging from whether one network could handle the volume of the world’s two largest stock markets combined to whether the four-letter symbols used by most Nasdaq companies would gum up the computer system at the NYSE, where most companies have one-letter to three-letter symbols.”

“Beyond that, the talks have highlighted lingering concerns about whether a floor-based trading model such as the Big Board’s is sustainable in an age of electronic trading and terrorist threats.”

“Still, the discussions between two such intense rivals would have been unthinkable weeks ago and illustrate the extent to which the attacks have forced much of Wall Street to rethink the way it operates. Already, the NYSE has opened up part of its downtown headquarters to the American Stock Exchange, whose offices have been inoperable since the collapse of the World Trade Center. The Amex has traded its stocks at the NYSE and its options at the Philadelphia Stock Exchange.”

“Nasdaq, which relies solely on electronic trading run out of computer servers in Connecticut, would appear to be somewhat less vulnerable to attack than the NYSE, whose trading community of roughly 3,000 people works at a single physical site at 11 Wall St. But Nasdaq’s systems also suffered in the hours and days after the attack, mostly because of telephone problems that made it difficult for the exchange to connect electronically with the firms that trade Nasdaq stock.”

“The idea that one market could be the other one’s backup in the event of another emergency was welcomed by traders. ‘It makes me feel better that if the worse-case scenario did come about, the U.S. markets could get up and going,’ said Joseph Della Rosa, a managing director in equity trading for Goldman Sachs Group Inc.”