Dealer's error halts trading in quarter of FTSE 100

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The Independent Online

Trading in a quarter of the stocks which make up the FTSE 100 had to be suspended yesterday morning, after a dealer at Deutsche Bank botched a vast programme of share sales.

Trading in a quarter of the stocks which make up the FTSE 100 had to be suspended yesterday morning, after a dealer at Deutsche Bank botched a vast programme of share sales.

The programme of sales was done at 8.14am, and sent the index plunging. Immediately after the trades it was off 208.6 points, before an equally dramatic recovery. It closed last night down 18.7 points, at 6,582.

The trades, which involved all 100 blue-chip stocks but only 15 million shares in total, are believed to have been related to the expiry of a futures contract. Because a technical glitch brought Liffe, the futures market, to a standstill for two hours, Deutsche's contract had to exercised on the cash market.

The episode caused dramatic falls in several of the more thinly traded stocks, prompting the London Stock Exchange to suspend 23 blue chip stocks automatically. Suspension is triggered whenever the share price falls by more than 5 per cent, giving dealers five minutes to reconsider their bids or offers before trading recommences.

There was no comment from Deutsche last night, but it was believed that no significant losses would have been incurred, and no heads would be rolling. "Some kid down on the trading floor is just going to have the mickey taken out of him for a while," said one insider.

The Stock Exchange gave Deutsche the opportunity to cancel the trades, but the bank declined.

The share sales should have been carried out at mid-range prices, calculated over time to give a more accurate reflection of the market in individual stocks. Instead, an inputting error saw all 200 deals carried out at "best price", where the trades are carried out at any price, selling even to brokers bidding well below the prevailing level.

Prices in the first hour of trading are notoriously unreliable, as volumes tend to be low and wild swings can be seen in individual stocks. Because there were so few brokers bidding for stock at that time, Deutsche had to make do with considerably lower prices.

Liffe was out of action for the first two hours of the day - the worst crash in its history. An overnight upgrade to the network that gives dealers access to its trading system, Liffe Connect, failed as soon as trading began. Liffe reinstated its older network, and the problem with the new system had still not been resolved last night.

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