There was a bad case of the morning after the night before at the London Stock Exchange as relief that it was business as usual after Wednesday's fiasco was tempered with exhaustion. Senior staff were up all night trying to get to the bottom of the glitch that brought Europe's most important stock market to its knees on what should have been its busiest day.
For all the blood-curdling calls for the head of chief executive Gavin Casey on Wednesday, with the system up and running the traders who wanted his "balls chopped off" the night before were again too busying making money to care. They also played down suggestions that the exchange could sue Andersen Consulting, which supplied the £120m system. "We are working co-operatively with Andersen rather than through the courts," an exchange insider said.
David Greene, at City Law Firm Edwin Coe, said if anyone sued over Wednesday's dÃ©bÃ¢cle, it would most likely be a wealthy individual who was unable to "bed and breakfast" their shares (ie sell with intention to buy back once the tax liability has passed), because of the systems crash.
The LSE is battling on two fronts - on the one hand fighting to stop upstarts like Tradepoint and crossing networks like Posit and E-Crossnet eating its lunch, and on the other to ensure that it, rather than Frankfurt, will be the winner in the European Stock Exchange consolidation game. A technology foul-up that leaves tens of thousands of well-paid traders idle for most of their working day is something it can ill-afford.
Just as the Eurex computer system was the weapon that enabled Frankfurt to elbow Liffe, the London derivatives exchange, out of the way in the campaign to become the world's biggest futures exchange, Frankfurt, which is on the runway for a June IPO, is hoping to use XEtra, its cash equity trading system, to pull off the same kind of coup in Europe at the LSE's expense.
Following the Paris Exchange's recent coup in pulling off a merger with Amsterdam and Brussels, London and Frankfurt are talking again. This kind of problem is hardly going to strengthen Mr Casey's hand.
Domestically, too, the damage may prove more corrosive still. Richard Kilsby, chief executive of Tradepoint, the embryonic rival exchange, could not have hoped for a better advertisement than the Stock Exchange's problems paraded on TV news.
Martin Wheatley, the Stock Exchange's beleaguered head of development, said that allowing the proliferation of alternative dealing systems was not the answer. "People want to have their cake and eat it." He saidpeople complain when things go wrong, but they would rather have one central market which can guarantee the best price.
Until Wednesday, the exchange could count on the support of the authorities for its views. But Howard Davies, chairman of the Financial Services Authority, who two days before was speaking in similar terms, yesterday suggested that the exchange's virtual monopoly in UK trading might not be the blessing he had thought.
He told the BBC's flagship Today programme yesterday: "For the moment the Stock Exchange still does about 98-99 per cent of the volumes, so the exchange is what we have to focus on. But it may well be in five years' time we are looking at a much more varied picture with a variety of ... alternative trading systems or electronic crossing networks also transacting business in the same equities."
The root of Wednesday's problem was that the overnight processing of the previous night's data had not been completed before the Stock Exchange computer's programme to start the next day's trading was fired up. The result was that when brokers started inputting quotes they became jumbled with the previous day's prices.
Stock Exchange officials yesterday defended themselves, insisting the nature of the glitch was such that there was no alternative but to take the system down. The LSE said it had hardware back-up but when there is a problem with the price data, as occurred on Wednesday, all the hardware back-up in the world does not help.
But computer experts disagree. Mike Lucas, Technology Manager at Compuware, an independent software vendor that works with online brokerages and exchanges, says there are applications systems which could have warned staff, in time for corrective action, that the overnight processing was not going smoothly. "There are applications which could have been put in place which will watch over overnight processing and tell operators whether it would overrun. I am surprised that this had not been done," he said.
He believes Wednesday's problems have exposed how reliant the exchange's systems are on a traditional way of operating which may already be past its sell-by-date.
The Stock Exchange, like many manufacturing companies, has a mindset rooted in the days when there was a 9-5 working day and a night-time when systems went offline and reconciliation and maintenance could be done. But with exchange hours getting longer, and e-commerce ensuring even retail investors can be online 24 hours a day, such a mindset is woefully out of date. New systems being devised for e-commerce do not need to be offline for 12-14 hours a day. Perhaps the exchange needs to junk its system and the thinking behind it.
Mr Lucas again: "This is the second issue this week with the LSE, it is maybe an indicator of a system that is coming under pressure from a human as well as a technology aspect."Reuse content