Friday June 2, 4:23 pm Eastern Time Age takes heavy toll on Toronto stock trading system By Luke McCann

TORONTO, June 2 (Reuters) - Canada's main stock exchange, plagued by a string of technical mishaps, may be burning out rather than fading away.

When the Toronto Stock Exchange suffered another embarrassing technical glitch on Thursday, halting trading for about four hours in its flagship issue, Nortel Networks Corp.(Toronto:NT.TO - news), furious investors were forced to shift their trades in the stock to the New York Stock Exchange.

``It makes you look like a Mickey Mouse operation (when) you're trying to be competitive,'' one trader said.

``I think it's a major concern, but we're lucky on this one because (Nortel) is inter-listed in New York...but it's potentially a major problem because it just gives you all the more reason to be trading in New York rather than here,'' he said.

The botch-up of Nortel, the TSE 300 Composite index's most heavily weighted stock, is the latest in a series of miscues that started with a systems crash in February, two outages on March 7, which stopped trading for two and a half hours in total, and another short-lived hitch in April.

``It's been frustrating,'' said Brendan Caldwell, president and chief executive of Caldwell Securities.

``My expectation is that they will get this fixed, there's no problem you can't fix by pouring enough money at it. But it's more than just the technical problems, it's the perceptual problems.''

The TSE's latest debacle comes as the exchange is in serious discussions on forming partnerships with other exchanges.

``The TSE is going to have to really work to fix that perception, and part of that is going to be keeping the technical difficulties to a minimum, and part of that is going to have to be an active marketing campaign, talking about what they do well,'' Caldwell said.

In April, Nasdaq and the Quebec government unveiled plans to create a Montreal-based electronic exchange to be called Nasdaq Canada, a move that seemed to outflank the TSE badly, analysts said.

The proposed exchange will give Canadian companies better access to capital markets, Quebec officials said. The government of the mainly French-speaking province has enacted a special law clearing the way for the creation of the exchange so it can begin operations in the third quarter of this year.

Practices at the TSE, which will complete an overhaul of its 23-year-old Computer Assisted Trading System (CATS) by early autumn, are a bit more complicated than straightforward order trading, said Fred Ketchen, director of equity trading at ScotiaMcLeod.

``You can find out who's bidding for a stock in Toronto, who's offering it, how much they bid for it, how much they offer and identify all the participants -- you can't do that in any other market in the world,'' Ketchen said.

``In the last three years the number of down incidences have increased, but keep in mind that as you age, some of your parts begin to rust out,'' he added.

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-- Martin Thompson (mthom1927@aol.com), June 04, 2000