http://news.bbc.co.uk/hi/english/business/newsid_703000/703859.stm

What went wrong?

The London Stock Exchange says it has tracked down the fault that caused its share trading system to collapse for eight hours on Wednesday.

The exchange says technicians who worked through the night discovered that an error between two computer programs had resulted in the system transmitting share prices before they had been updated.

The only solution had been to switch the whole system off and start again, a procedure which took several hours to complete.

The failure came on the traditionally busy last day of the tax year and followed turbulent days on stock markets around the world.

No alternative

The London exchange said it did have back-up computers but that because the fault had affected live share prices, corrupted data would have been replicated in the back-up system.

The computer programs are managed for the exchange by Andersen Consulting.

Andersen has declined to comment on the trading disaster, which is being investigated by the UK watchdog, the Financial Services Authority.

The FSA has said it will make its findings public in due course.

Its chairman, Howard Davies, said: "Obviously what we need to look at now is why it happened and what we can do to put in place failsafe mechanisms to prevent it happening again."

The FSA is checking whether the prices used when trading did eventually start in the afternoon were accurate and reasonable.

Business was cut to less than half the two billion shares a day normally traded on the London exchange.

Changes

Mr Davies said that in future investors will put more business through rival electronic systems.

"It may well be in five years' time we are looking at a much more varied picture with a variety of what are called alternative trading systems, or electronic crossing networks, also transacting business in the same equities," he said.

Richard Kilsby, chief executive of rival exchange Tradepoint Financial Networks, said the problem underlined the case for competition in equity trading.

He said: "A much better model would be to have competing systems providing the trading mechanism and link them all up electronically so you could have a virtual exchange for a share."

Some trading in very liquid stocks such as Vodafone Airtouch did transfer to Tradepoint, which remained up and running throughout the day.

Conspiracy theories

Conspiracy theorists had a field day on Wednesday as the stock market degenerated into chaos.

Reports compiled from contributions to online bulletin boards and chat rooms suggested various plots supposed to be responsible for the debacle.

One common idea was that the system failure had been contrived to stop panic selling in the wake of falls on the US technology weighted Nasdaq index.

Some said it had been organised by large institutions - in league with the stock exchange - to make sure they were able to sell plummeting technology stocks ahead of private investors.

One of the more extreme theories suggested that the unusual aligment of Mars, Jupiter, Saturn and the Moon had been responsible.

Another proposed that the Germans were "trying to do to our financial services industry what they did to Rover".

Others consoled themselves with the thought that, with the market closed, for a while at least they were not making any more losses.

-- Jim McAteer (jim_mcateer@hotmail.com), April 06, 2000

Answers

[Fair use for education and research purpose only]

Title: Three stock exchanges zapped by computer glitches

By Maria Trombly

04/06/2000 Three of the world's largest stock exchanges suffered from unrelated computer problems this week during a period of particularly heavy trading.

The London Stock Exchange was hardest hit, with an eight-hour outage yesterday (see story). The exchange opened at 3:45 p.m. Greenwich Mean Time, rather than the usual 8 a.m. Because of the glitch, trading hours were extended from 4:30 p.m. to 6:30 p.m.

The problem was caused by the network that takes real-time price and other information from the central trading systems to market users, said Gavin Casey, chief executive of the London Stock Exchange, in a statement released Wednesday.

The shutdown occurred on the last day of the British tax year  a time when many British investors engage in heavy trading to avoid capital gains taxes  and just hours after violent market swings in the U.S.

Also on Wednesday, a system glitch at the Toronto Stock Exchange prevented trading between 4 p.m. and 4:30 p.m. At 4 p.m., closing prices are fixed, but traders still have half an hour to buy and sell stocks at those prices to execute unfinished trades.

The exchange's computer system instead shut down at 3:58 p.m., and although the problem was immediately fixed, officials decided to cancel the extra half hour of business because the closing prices didn't reflect the last two minutes of a normal trading day.

"It was a (systems) software issue," said Toronto exchange spokesman Steve Kee. As of Thursday afternoon, however, the exact cause of the problem had not been determined.

The Nasdaq Stock Market was able to keep functioning all week, although it experienced an hour-long slowdown as a result of high trading volumes and system capacity problems on Tuesday (see story).

It has been a volatile week for stock trading: Nasdaq processed a record 6.5 million quote updates Tuesday, compared with the previous record of 5.8 million.

Nasdaq's record volumes caused the slowdown of its SelectNet order management system. A spokeswoman said technical changes should make it easier to handle such volumes in the future.

http://www.idg.net/servlet/ContentServlet? global_doc_id=163764&page_id=712&content_source_id=5&return_spot=ts2&l ogger_loc=front_pages%2Fenglish

-- (Dee360Degree@aol.com), April 07, 2000.