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Thursday, 6 April, 2000, 14:22 GMT 15:22 UK
London trading: what went wrong?
London Stock Exchange
The London Stock Exchange says it has tracked down the fault that caused its share trading system to collapse for eight hours on Wednesday.

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.

Howard Davies
Financial regulator
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.


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.

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See also:

06 Apr 00 | Business
London market opens smoothly
05 Apr 00 | Americas
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15 Mar 00 | Business
Stock exchange votes to go public
20 Mar 00 | Business
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