Good Friday Trading-Free Since 1907 Panic

Good Friday Trading-Free Since 1907 Panic
Bloomberg.com: Exclusive

By Coincidence or Not, Good Friday Trading-Free Since '07 Panic

By Chris Dolmetsch

March 21 (Bloomberg) -- The New York Stock Exchange is closed today, as it has been every Good Friday for nearly a century and a half except for in 1898, 1906 and 1907.

That last one was in the same year as the infamous Panic of 1907, when the value of U.S. stocks plunged by more than a third. Hence, a legend that persists 101 years later: Traders get to stay home the Friday before Easter not just because it's a Christian holy day but because of its association with one of history's great bear markets.

Brooks P. Nelson, a second-generation professional investor, remembers his father telling him the story every year: ``He used to say, `It's closed on Good Friday because of the panic of aught-seven,''' Nelson, 53, said in a telephone interview. Rumor had it that in 1907, ``the good Irish-Catholic traders said, `We told you not to open on Good Friday.'''

Supposedly, the tale went, the market behaved so badly that the exchange vowed never to allow trading on Good Friday again. Circumstantial evidence aside, market historians and the NYSE itself say the story is without foundation.

``I have no evidence in the archives that I've seen or the notes of the details that would prove that theory,'' said Robert F. Bruner, co-author of ``The Panic of 1907,'' published last year, and dean of the University of Virginia's Darden Graduate School of Business Administration. ``The panic itself occurred in October 1907, although in March of 1907, there was a significant break in the market.''

A Good Good Friday

Jeffrey A. Hirsch, editor of ``Stock Trader's Almanac,'' said that downturn started March 13, when the Dow Jones Industrial Average tumbled 3.9 percent, and continued the next day, when it lost 8.3 percent. Good Friday in 1907 fell on March 29, when he said the Dow climbed 2.5 percent.

The bear market began after the market peaked in September 1906. By November 1907, the value of all listed U.S. shares had plunged 37 percent, and at least 25 banks and 17 trust companies collapsed.

Among them were New York's Knickerbocker Trust, where rumors of financial problems triggered a run on banks in the city and contributed to the crash, according to the NYSE's Web site. The crisis ultimately prompted the creation of the Federal Reserve system.

``Closing on Good Friday doesn't appear to coincide with any market panic or crash,'' said Ray Pellecchia, a spokesman for the Big Board. The exchange's records go back to 1864 and show trading only on those three Good Fridays in the late 19th and early 20th centuries, he said.

Only Non-Federal Holiday

The Friday before Easter is the only one of nine stock- market holidays that isn't also a federal holiday. Other U.S. stock, options and derivatives exchanges, including the Chicago Mercantile Exchange, are also shut today. The Securities Industry and Financial Markets Association recommends that bond markets close in Japan, the U.K. and the U.S.

The exchange has a rich Irish-Catholic heritage and was once steeped in religious observances, said Peter Kenny, a managing director of institutional sales at Knight Equity Markets in Jersey City, N.J., who worked at the NYSE for 28 years. That made trading on Good Friday out of the question, he said.

``It was never open to debate, never, ever,'' said Kenny, whose grandfather, legendary U.S. government bond trader Christopher Devine, built **Our Lady of Victory chapel near Wall Street for convenient confessions. ``People were expected to go to Our Lady of Victory on Wednesday and Thursday, all of Holy Week.''

`Insufficient Demand'

Bruner, the author, said there's a simple explanation for why markets shut down on Good Friday: ``The financial institutions close on holidays, frankly, out of the belief that there is insufficient demand, insufficient trading activity and insufficient business,'' he said. ``I doubt the theory that closing on Good Friday was related to the panic of 1907.''

Nelson, president of Nelson Roberts Investment Advisors in Palo Alto, California, said he has no idea whether there's truth to what he was told by his father, Philip, who worked in Manhattan's financial industry for almost 20 years before moving to the West Coast.

``It's one of those things,'' Nelson said. ``Wall Street lore.''

**Our Lady Of Victory - was a common, sometimes daily pit stop for yours truly. -st0ckman

Francis Cardinal Spellman founded Our Victory Church at Pine and William Streets in the financial district of Manhattan, in 1944. It is known as the War Memorial Church, and at the front door, there is a quotation from Cardinal Spellman:

“This Holy Shine is dedicated to Our Lady of Victory in Thanksgiving for Victory won by our Valiant dead,
our soldier’s blood, our Country’s tears, shed to defend men’s rights and win back men’s hearts to God”