Computer Crash Prevents London Stock Exchange Trading

The London Stock Exchange should have had a pretty good day on Monday, right after the US government announced it was nationalizing Fannie Mae and Freddie Mac, the troubled mortgage companies. Markets around the globe boomed. Computer troubles prevented traders from connecting to the LSE’s system for nearly seven hours, wiping out most of the day’s trading. Billions were left on the table, and the competition is thrilled.

A spokeswoman for the LSE yesterday said that there was a software problem that has since been fixed. She denied that the problem was caused by huge volumes at the start of the day. Trading yesterday appeared to be back to normal. Regrettably, the fear will remain that it could happen again since it happened yesterday, and in November of last year.

One of the LSE’s rivals, Chi-X, said the incident showed the system needed a “root and branch change.” Chi-X wants a new approach entirely with trading prices taken from a variety of sources. Its chief executive Peter Randall said, “We’ve newer software and more modern technology and offer real time market data for free.”

The BBC reported, “Another rival, Turquoise couldn’t have hoped for a better publicity coup for its service in the first week of its operation. ‘This emphasises the real need and opening for alternative platforms,’ a spokesman for Turquoise said. He added that Turquoise had put a great deal of time, effort and investment into the resilience of its computer systems'.”

In any sound computer system, there are redundancies built in. If a piece of the system fails, there should be a back up to prevent the entire edifice from falling apart. City veteran David Buik, from BGC Partners, told the BBC, “For the life of me, I cannot understand why the LSE system is not run in duplicate. So much and so many clients rely on the LSE's durability. They cannot afford to be let down.” The LSE needs to either build in greater redundancy into its own system, or Chi-X, Turquoise and others will wind up being the back up. And that’s bad for the LSE’s business.

© Copyright 2008 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Fedora Linux.

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