Stock exchange told to come clean

London Stock Exchange traders are demanding to know exactly what went wrong this week when the exchange's Tradelect core...

London Stock Exchange traders are demanding to know exactly what went wrong this week when the exchange's Tradelect core trading platform was unable to complete trading on what was potentially the busiest trading day of the year.

Because of the system problem, traders were unable to complete trades from 9.15am to 4pm on Monday.

Speculation in the financial markets about what went wrong is causing uncertainty among companies that rely heavily on the exchange.

Two sets of events have been linked with the failure.

First, he glitch came early on a day expected to be a busy one following the US government's decision to bail out mortgage lenders Fannie Mae and Freddie Mac.

Second, David Lester, CIO at the LSE, told Computer Weekly in May that major upgrades to Tradelect were due about now.

Lester said that the number of messages processed by Tradelect would double to 10,000 in September after the completion of the integration of Milan-based Borsa Italiana, which LSE acquired last year for £1.63bn. The exchange also plans to halve the time taken to complete a trade to three milliseconds by the end of October, doubling volumes again.

Jon Cosson, head of IT at stockbroker JM Finn, said his firm could only trade on foreign markets on Monday. "The London Stock Exchange is a critical resource and we cannot do our fundamental work without it.

"They need to come clean because by keeping quiet they are creating speculation and playing into the hands of their competitors."

Cosson added that while the London Stock Exchange was a very important company it was no longer a "closed shop", with new competitors springing up following the introduction of the Markets in Financial Instruments Directive (MiFID), which liberalised the market by removing the rule that all trades had to go through local exchanges.

Towergroup analyst Bob McDowall said the incident was "very damaging to the LSE reputation and to London as a financial centre for trading equities".

He said the LSE should provide a full non-technical but detailed explanation of the reason for this interruption to all its stakeholders.

The stock exchange has said it has fixed the software problem it blamed for preventing Tradelect from completing trades on Monday.

But it dismissed speculation that the high trade volumes or the integration of Borsa Italiana business were to blame.

"It was software-related, but it was not the result of high volumes or the integration of Borsa Italiana," said a spokeswoman. "We have put in a software enhancement and are confident this will not happen again."

The spokeswoman did not give precise details of the cause of the problems but said it was the result of "a combination of technical processes occurring at the same time."

The stock exchange infrastructure is mirrored and backed up.

"The LSE is saying there was no way of rolling back to the previous day's setup, so there must have been a critical application failure, said Chris Skinner, CEO at financial services think-tank Balatro.

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