Computer says No to LSE rally

IT problems are annoying for us all - but particularly if you're one of the world's largest stock exchanges...

Last Updated: 31 Aug 2010

Yesterday the London Stock Exchange suspending trading for seven whole hours because of a technical glitch, on the day that the government-backed rescue of US mortgage giants Fannie Mae and Freddie Mac sent stock markets soaring all over the world. The suspension will have cost traders millions of pounds, and will do serious damage to the LSE’s claims to be the world’s top exchange (at a time when competitors are starting to breathe down its neck). Imagine how annoyed you get when your email breaks, and multiply it by several million…

Most businesses would lose out in a big way from a seven-hour IT crash. But it’s a lot worse if you’re an electronic trading exchange, and your day-to-day business – not to mention zillions of pounds of trading money – is wholly dependent on your complicated technology working perfectly. And just to make it even more embarrassing, LSE boss Dame Clara Furse wrote to the FT yesterday extolling the exchange’s use of the latest technology. Now that was just asking for trouble…

The problem apparently began at around 9am, after a first hour in which 270m shares changed hands and the FTSE 100 jumped by 200 points. But according to the LSE, the system wasn’t overloaded – it blamed some kind of vague ‘connectivity issue’ that prevented traders accessing the electronic platform. The issue wasn’t properly fixed until about 4pm, during which time traders around the world gleefully cashed in as their frustrated London counterparts sat around twiddling their thumbs and twanging their braces. And getting increasingly irate…
David Buik, from inter-dealer broker BGC Partners, told reporters that the whole thing was a ‘shambles’, and demanded to know why the LSE didn’t have a decent back-up system. ‘So much and so many clients rely on its durability. They cannot afford to be let down,’ he said. And because the LSE refused to extend its trading hours (as it did after its last technical glitch in November), there were only 1.3bn shares traded during the whole day – less than half Friday’s total. All in all, a bit of a disaster on what could have been its most profitable trading day this year.

To make things worse, the emergence of rival UK exchanges like Project Turquoise (a joint venture between several of the leading investment banks) means that it’s never been more important for the LSE to be on the top of its game. We suspect there’ll be a few red faces in the LSE IT department this morning...

In today's bulletin:
House sales hit 30 year low
Computer says No to LSE rally
No fire without smoke for Johnsons
Why managers must be more flexible
SME bosses keep the faith

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