In May, senior executives from Wall Street's top investment banks gathered at a conference center with a cadre of federal and local law enforcement authorities. Their task for the day was to simulate, down to the last detail, the aftermath of an explosion of a bomb in Midtown followed by others in Lower Manhattan.

Their scripts, distributed to them that day, read like a Hollywood screenplay: electricity was out, telephone lines had been severed, employees were evacuating buildings and the markets were down - what do you do?

The searing events of Sept. 11, 2001, when 1,400 employees of securities firms were killed, prompted some changes in and around Wall Street that are easy to see. Morgan Stanley, for instance, which lost 1.2 million square feet in the south tower of the World Trade Center, is now moving employees to a new corporate installation in Westchester with the capacity to house 3,000 people. Lehman Brothers, whose headquarters in the World Financial Center was destroyed during the attacks, is comfortably ensconced in a new office building in Midtown.

But the more profound effects are less evident - like war games played by managing directors of Wall Street firms. In the wake of the loss of 32,000 financial jobs in New York State of the 211,000 before the attacks and the billions of dollars spent since on security, business continuity and disaster-recovery planning, there is a prevailing sense of wariness, both with regard to the uncertain security environment and the future direction of the markets.

"People are cautious and 9/11 did not pass unnoticed," said Roy Smith, a former Goldman, Sachs partner and a professor of finance at New York University. "We have had a bubble, and there is political uncertainty. Yes, firms have let a lot of people go, but firms are adaptive and have made money other ways, such as by trading."

To be sure, many of the lost jobs have resulted from trends that predate Sept. 11, 2001, like industry consolidation, more automated trading, weak equity markets and, most significantly, the migration of jobs to other places. But economists note that the attacks have hastened these trends, especially with regard to firms moving their operations.

"9/11 has accelerated and expanded the need for geographic dispersion for Wall Street firms," said Frank Fernandez, chief economist for the Securities Industry Association. "The result is job losses for New York City."

Not all firms have moved away. Merrill Lynch, which was forced to evacuate one of its buildings at the World Financial Center, has moved back into the building. And Goldman, Sachs, long an anchor in Lower Manhattan, is expected to start construction this year on a global headquarters in Battery Park, with its completion planned in 2008.

Wall Street firms are still making billions in profits, thanks mainly to the bull market in bonds that was further spurred by the Federal Reserve's reduction of interest rates right after the attacks.

But as the third anniversary of Sept. 11 approaches, an air of extreme caution pervades Wall Street - symbolized best, perhaps, by the phalanx of machine-gun toting police officers that stand guard at the New York Stock Exchange.

Indeed, of all the institutions on Wall Street, the exchange - which was forced to close for four business days after the attacks and was said in August by the Bush administration to be a target of a terrorist threat - has enacted the most significant and far-reaching security and contingency plans.

Since the attacks in 2001, it has spent more than $100 million to prevent or recover from a market interruption, with a contingency trading floor, capable of trading all exchange-listed stocks immediately, as the centerpiece.
The exchange has also put in place a new communications system linking its data centers to its member firms through a secure network that skirts traditional phone lines.

Nasdaq, the stock exchange's electronic competitor, was affected less by the attacks - it says it could have started trading on Sept. 11 - because its main trading facilities are in Connecticut, with a backup installation in Maryland. Still, it now has a contingency program that would enable it to trade all New York Stock Exchange stocks in the event of a major disruption.

Wall Street firms have also upgraded their backup trading facilities, making sure they are a significant distance from their headquarters. Lehman Brothers and Merrill Lynch have backup operations in New Jersey, while Morgan Stanley has its new building in Westchester, which will house the retail brokerage division, to use in an emergency.

The increase in spending on security, business continuity and disaster recovery has been striking. This year, analysts at the Tower Group, a consulting firm, estimate that Wall Street firms will spend $3.8 billion - up from $1.8 billion in 2001 - for contingency planning and security measures, with more than 60 percent of that dedicated to information technology and the rest going toward new building and the hiring of personnel. Spending is expected to level off in the coming years, analysts say.

As for the exercises in May, they were successful, allowing the 13 broker-dealers that took part to test employee evacuation strategies and the activation of their backup sites as well as their ability to prepare for a market opening the next day. "It was intended to be as real as it could be," said Howard Sprow, the Securities Industry Association's director of business continuity planning.

While Wall Street's cautious mood can, in some ways, be attributed to security concerns that linger three years later, it is also true that the wave of accounting scandals and the explosion of regulatory investigations into research and mutual fund trading abuses since the attacks have left deep marks. And while 4,000 jobs were added this summer, economists do not expect job growth on the Street to continue, especially in light of the wan markets and the strides that firms are taking to automate their trading desks, making them less dependent on labor.

"Yes, you had a geopolitical event," said David Trone, a securities analyst at Fox-Pitt, Kelton, "but you also have a weak economy, automated trading in equities, regulatory issues and accounting fraud. They all hit at the same time and have changed the business in a permanent way."