Excerpt from COVERED OPTION, a novel-in-progress: Chapter One

The location of the New Stock Exchange’s backup trading site was one of those rare Wall Street secrets that stubbornly remained secret. There were plenty of guesses floating around, but nobody knew for sure. I’d heard it was in Queens, but that was just gossip.

Then Steve Johnson told me and a British journalist named Andy Khan the exact address in downtown Brooklyn – 1939 Tillary Street -- at the Securities Industry Association's annual conference in Boca Raton.

“They poured money into that site in buckets,” Steve said. “Everything triple-time. They had to reassure the markets that terrorists would never close the exchange again. If anything happens at Wall and Broad, everyone just takes the subway to Brooklyn.”

Steve was not a particularly chatty guy, but he was eternally hungry for professional recognition. We were attending the conference as representatives of the Securities and Exchange Commission, and spoke at a panel on compensation systems. But Steve's real reason for attending the conference was to suck up to Khan, a reporter from Financial Technology magazine, who had just featured Steve in an article entitled "20 under 40: Financial Technologists To Watch in 2005."

The two had fallen into a passionate conversation about data security at a press dinner. The event was held in one of the hotel's smaller dining rooms, which looked out on a spectacular beach. A dozen or so financial journalists stood near the bar, nursing their drinks and waiting to pounce as their prey entered the room. At a reception next door, a pianist was trying to turn Broadway standards into rock and roll hits. Outside, the sky was making a fiery descent into dusk, but the intense air conditioning and the ambient lighting in the room made the sunset seem fake.

Andy Khan had latched onto Steve as soon as we walked in the room. Skinny and dark-skinned, he wore a loud houndstooth sports jacket that only a journalist could get away with, and combed his hair so one lock fell over his right eye.

"I'm writing a piece on data perimeter protection," he told Steve as we took our seats at end of a long table. "The NYSE must be very big on that."

"Absolutely," Steve said, his eyes lighting up at one of his favorite topics. "They’re taking no chances this time. Complete lockdown mode. They really know what they’re doing.”

Andy raised a skeptical eyebrow and started taking notes.

“It’s first class all the way,” Steve insisted. “Smart guys in charge. Internal access controls, intrusion detection up the wazoo.”

“I heard they’re hooked up to FinCen in real time,” Andy said.

Steve hesitated a split second. “Who told you that?”

“Somebody at Verizon.”

“It’s better than that. They can upload suspicious hits to FinCen, the FBI, and the PAC system. And then download suspected terrorist matches. In real time."

Then they were off into data security land, with Steve spewing a stream of technical specs at eighty words-a-minute, and Andy frantically writing it down in his slim wirebound notebook. They were a striking sight: the SEC’s chief technology officer, a slouching alpha geek, his eyes half closed in a kind of Zen trance, and his dapper, twenty-something British-Indian acolyte, smiling and nodding as his hand flew across his notebook.

"What about the physical perimeter stuff?" Andy asked, flexing his fingers to prepare for the next round of scribbling.

"The police do spot inspections of trucks traveling south of Canal Street," said Steve. "Then the exchange security staff does a canine sniff and manifest check of all Broad Street traffic. They've got automated screening of packages, mail and visitors. Emergency generators and stored fuel and water onsite. And I'm sure you've seen the NYPD Hercules Squads out there with their submachine guns."

At the table near us, three reporters politely elbowed each other for the two seats on either side of the Federal Reserve Bank vice chairman, the conference's only minor celebrity.

I tried to look surreptitiously at Andy's notebook, which was filling up at a rate of a couple pages a minute with a weird mix of sloppy handwriting and incomprehensible abbreviations. The revelations about NYSE operations made me uncomfortable, but I couldn't tell what was public information and what wasn't. I tried to catch Steve's eye several times, but it was hopeless. He had finally found somebody who realized he was a stone genius on data security. His friends were running the NYSE data security show, and he had to prove they knew what they were doing.

Andy’s strategy was to let Steve chatter on for a few minutes, then press for details. Physical security. Ventilation systems. Backup power. He was probing for holes. Did the exchange have this or that covered? The implicit question was: Were they smart guys? Could Andy write the "Exchange Unprepared for Terrorist Attack" story? Steven's answer was unequivocal: The exchange guys were his friends. They were smart. Very smart. That story won't fly.

And then a flood of technical details to convince the skeptical British reporter. The words flew out of Steve's mouth in a soft mumble. Andy was alert, busy with the physical effort of note taking. They spent a lot of time on the various network servers. The pricing servers that went out to traders around the world. If that was interrupted, the whole thing would shut down. Or the trade order servers. The data files. If they were corrupted, you might as well close up shop. The more Steve asserted his technical mastery, the faster the torrent. I didn't know who to hate more, my rubber-mouthed American colleague or the smiling Brit who was so skilled at pulling it all out of him.

"So why did SIAC set up the SFTI network?" Andy asked, flicking the hair out of his eyes with a twitch of his forehead. "Did they want to have a survivable private communications service if anything happened to the exchange?"

He closed his notebook slowly and pushed it a couple inches away from his bread plate. It was a casual gesture, cool and practiced. An acknowledgement that they were about to discuss security issues he wasn't going to publish.

"That was their big mistake on 9/11," said Steve quietly. "They thought they had diverse data paths for the buy and sell orders, but the telecoms rerouted all the order flow through the two Verizon hubs at Broad Street and West Street. Everything's different now. You connect to two or more of the eight national SFTI access nodes. If service is disrupted at one node, you can still get service at the others."

"Why don’t we talk about something else," I said, giving Steve a quick kick in the shins. “That’s classified.”

"You’re wrong," said Steve, as if I were an undergrad speaking up in a graduate seminar. "The SFTI stuff is public. SIAC needs backup service over public carriers in case the bad guys try to take down the private network. But that's never going to happen. They've got redundant equipment, data traffic over different fiber-optic rings, geographically diverse routes...It's all state-of-the-art."

"Let's just say something happens at downtown," said Andy, leaning back in his chair with exaggerated aplomb.

"Then they activate the phone trees,” said Steve. “Everybody is told to show up the next day at the backup site. There's room for fourteen-hundred people there. Trading rings, administrative space, live price feeds."

"I heard it was in Queens," Andy said.

"No, it's in the MetroTech Contingency Center in Brooklyn, where all the banks have their backup facilities."

"On the same block as the investment banks?"

"No, but it's right down the street, in an old paper box factory at 1939 Tillary. It's all powered up and ready to go."

This time I aimed my kick at the fat part of his calf and put some heat into it. Steve's chair scraped backward. He blinked a couple times, but his face remained immobile.

"Of course, all this is all off-the-record," he added.

Andy gave us a deeply pained look. We had dared to question his integrity on something as sensitive as this? Then we all stared at his notebook, as if it were the last crab cake appetizer and we were waiting to see who would grab it first.

"I suppose they have the same kind of perimeter security at Metrotech," Andy said. It was a bald attempt to keep the momentum going, but this time Steve turned evasive.

"I don't know much about MetroTech," he said. "When I visited the space a few weeks ago, it looked pretty quiet. But I'm sure they'll roll out the security if the terrorists ever shut down the Wall Street facility."

"I've never been down to Metrotech either," Andy said, stifling a yawn.

He fingered his pen and slipped his notebook into the vest pocket of his sports jacket. "I suppose I should visit next time I'm in town. Randy Hubbard from Chase has been trying to get me to go there for ages, but it seemed like a lot of trouble. I suppose if anything happened to the subways in lower Manhattan, they could shuttle the traders to the backup site on ferries."

"The terrorists will never shut down the NYSE again," said Steve. "The exchange got caught with its pants down on 9/11. But now they've built an impregnable fortress."

Andy nodded and said: "We all certainly hope so."

At that point a trim older gentleman joined our table. He introduced himself as Jeremy Edwards, the chief operating officer of the London Stock Exchange. His wife, a thin, horsy-faced blond in her early fifties, was named Cynthia.

A champagne bottle popped merrily a few feet away and a sommelier wheeled in a huge silver ice bucket filled with a dozen bottles. It was the kind of presentation meant to stop conversation, and it did. The sommelier wore white livery with a gold stripe down the side of his pants. He looked like a recent graduate of Boca Raton High School.

Cynthia looked hungrily at the champagne as he poured it into her glass.

"How is it?" Jeremy asked, staring at it with intense suspicion.

She took a sip and wrinkled her nose in the slightest possible way. "Napa Valley," she murmured.

"Excuse me!" said Jeremy, calling out to the sommelier and holding out his glass as if were a urine sample. "Do you have any French champagne?"

The sommelier looked confused. "It is French champagne, sir," he said, in a syrupy voice straight from the Florida panhandle. He removed the cloth napkin from the bottle and showed him the label. "Nicolas Feuillate Brut. It was written up in last month's Food and Wine. I've got the article in my office."

Andy got up discreetly and headed toward the men's room.

"Barely drinkable," muttered Cynthia, under her breath, as she took a couple short sips.

I got up and followed Andy out. I thought it would be nice to hear more about the data security story he was working on.

I gave him a minute lead and proceeded down the hallway to the men's room. But there was nobody at the urinals. And nobody in the stalls. I raced downstairs to the other bathroom off the lobby, almost crippling myself on the landing. No Andy.

On the way back, I caught his checked sports coat in a corner of the lobby. He was doubled over in one of the pillowy lounge chairs, writing furiously in his notebook.

I pivoted in place and returned to the press reception, where Jeremy and Cynthia were getting zonked on gin and tonics, and Steve was flirting shamelessly with a tipsy blond from Dow Jones, who could have graduated with the sommelier.

"What was that for?" Steve asked, rubbing his calf.

"Keep your voice down," I said. "As SEC employees, we're supposed to protect the American financial markets, not betray them to foreign journalists."

"What's wrong with Andy?"

"I just saw him in the lobby writing down everything you told him."

"So what? He's a journalist. That's his job."

"His last name is Khan. That's what bugs me."

"He's a Brit for Christ's sake," he said. "Or are you prejudiced against people with Muslim names?"

"Of course not," I said. "I'm living with a Muslim. With any luck, I'm going to marry one."

"I didn't know Nan was Muslim. I thought she was Indian."

"There are 125 million Muslims in India."

"I had no idea."

"It doesn't matter whether the guy's name is Andy Khan or Dennis Hopper. Loose lips sink ships."

"There are a dozen tech firms working on that backup site," he said, angrily. "He can get the information from plenty of people he already knows."

"You are a complete idiot," I said, throwing down my napkin and stalking out of the restaurant.

As I walked down the hallway, I passed Andy coming back from the lobby, tucking his notebook into the inside pocket of his sport jacket.

We smiled.