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Last updated: November 8, 2007 6:54 am
Traders are braced for a nervous morning on Thursday after the London Stock Exchange's much-vaunted high-speed trading system ground to a halt on Wednesday afternoon, forcing the exchange to wipe clean its electronic price display system and leave part of its daily closing auction incomplete.
The outage happened just before 4pm yesterday - 30 minutes before market close and typically one of the busiest periods of the day. It meant traders were left for nearly three hours without reliable prices for the key FTSE 100 and all the exchanges' indices. The glitch - the exchange's first since early 2000 - left share traders unsure how much business had been lost and questioning how the market, Europe's largest, will open today. Although the LSE had last night identified the cause of the problem it was unable to explain how it had happened.
The LSE insisted that the trading system, known as TradElect, had not ceased to function. "There was no problem with the trading system at any point," it said.
Instead, it said the problem was the electronic connection between the system that displays orders to buy and sell shares, known as Infolect, and the market, had failed for some unknown reason.
That, however, is not how traders said they saw the problem yesterday, recounting their woes with some Schadenfreude.
"As far as we know . . . the exchange cannot be traded on," said the head of electronic trading at one European bank.
The FTSE 100 is expected to open about 80 points lower on Thursday after heavy falls on Wall Street on Wednesday and earlier in Asia.
The outage comes just days after the advent of new European rules, known as Mifid, aimed at promoting competition between banks and exchanges that have already spawned new, low-cost competitors to the traditional exchanges, including the LSE.
A group of the exchange's largest bank customers have plans to create a low-cost, high-speed rival, known as Turquoise, to compete with the LSE, a project about which the LSE has been dismissive.
Traders said they had some sympathy with the LSE over its technology difficulties. It is an issue over which all banks have stumbled many times in the past, as have competing exchanges. But the LSE's promotion of its electronic trading system has been tinged with a sense that it is invulnerable to competition, traders said.
"This is massive egg on their [the LSE's] face," said the head of trading at one US-based bank.
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