Big Bang mark two needs good typing

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The Independent Online
In a week's time Gordon Brown will press the button that launches Big Bang mark two when he opens the Stock Exchange's new trading system. Lea Paterson describes Saturday's final dress rehearsal, a day when typing mistakes moved the markets.

Market-makers will be brushing up on their typing skills this week, ready for the launch of order-driven trading next Monday, 20 October. On Saturday, in the sixth and final trial of the new system, inputting errors caused mayhem. Simple typing mistakes, like inserting one too many zeros, led to substantial swings in the FTSE 100.

Unlike the old quote-driven system, where prices were agreed over the phone, the new system, SETS, requires market-makers to type into an electronic order book the number and the price of shares they wish to sell.

Errors are potentially ruinous, as once a trade has been executed companies will be bound by the inputted prices. Counter-parties may waive their right to trade at the quoted prices, but are under no obligation to do so.

In an industry characterised by cut-throat competition, traders will certainly not want to rely on such displays of gallantry from their rivals. Hence the pressure on market-makers to make sure their typing is spot on.

Some have even opted to ban the computer option to sell shares at the "best available" price because this would result in sales at bargain-basement prices if these briefly became available on the system.

Next Monday is unlikely to see as many teething troubles as Saturday's dress rehearsal. To start with, most, if not all, companies will by then have fail-safe procedures in place, which market-makers will have to override manually to enter prices significantly different from prevailing levels. Some participants in Saturday's trial had these controls switched off.

What is more, as a spokesperson from the Stock Exchange put it, "People will key in with more caution when its the real thing".

These are unlikely to be the only teething difficulties. Angela Knight, a former Treasury minister and now chief executive of the Association of Private Client Investment Managers and Stockbrokers, has expressed concern that small investors will lose out.

Under the new rules, trades less than pounds 4,000 will typically be dealt with under the existing quote-driven system by so-called retail service providers (RSPs). Mrs Knight said at the weekend her main concern was that there would be fewer RSPs serving the market in the years to come.

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