LONDON — A major failure of a London Stock Exchange computer system threw the much-heralded launching of London's deregulated and computerized financial markets into chaos for more than an hour Monday.
After the fault was repaired, the traumatized stock market moved tentatively through the trading day without further incident, and trading volume was described as light to moderate.
"We didn't expect a completely trouble-free day and we haven't had one," said Nicholas Goodson, chairman of the exchange.
Apparently overloaded by what an exchange spokesman called "curiosity seekers," the computerized information system collapsed 30 minutes before the market opened at 9 a.m. It was restored briefly a few minutes before the opening but then broke down again for an hour before repairs were completed.
With the financial world looking on, the trading bell rang on the stock exchange to scenes of confusion on the market floor and a sense of desperation among market makers. They had been attempting, for the first time, to use the computer system to buy and sell stock from their offices, away from the trading floor.
Television crews installed to record the first minutes of the revolutionary changes in trading--collectively dubbed "The Big Bang"--found themselves filming a dud. "The only bang came from fists on the display units," an evening television anchorman remarked.
Preparation for Monday's changes began seven years ago and have cost several billion dollars. For the first time on Monday, foreign institutions, including the major American banks and securities houses, were permitted to trade in equities and government bonds; fixed-price commissions were scrapped; and the 200-year-old distinction between brokers, who conveyed orders from the investing public to the trading floor, and jobbers, who actually did the trading, was abolished.
Monday also marked the inauguration of a computerized stock quotation system enabling trading to move off the exchange floor. The system formed the centerpiece of a $120-million investment by the stock exchange itself to prepare for Monday's events.
Previously Proven System
However, it was not the new quotation system, called SEAQ (Stock Exchange Automated Quotations) that failed, but a proven computerized information service, called TOPIC (Teletext Output of Price Information by Computer), which a stock exchange spokesman said had been operating for six years.
"At around 8:30 (a.m.), TOPIC was subjected to a demand roughly 2 1/2 times its heaviest ever," spokesman Luke Glass said. "At that point, it just melted down."
A warning screened for much of the trading day urged dealers not to issue unnecessary requests for information. The session concluded quietly, and those responsible for the system said they had made a number of adjustments that would prevent such an overload at the start of today's trading.
"We can't guarantee it won't happen again, but we are confident it won't happen again," said George Hayter, head of new technology for the stock exchange.
There were no problems reported in the newly deregulated government bond market or the high-volume Eurobond market.
Despite the unfortunate start, those dealing in the market indicated that the relatively smooth trading through the remainder of the day had convinced them that the new system could work.
"It was encouraging, there's a future for it (the technology) here," noted Kenneth Joseph, head market maker at the W. Greenwell securities house, a subsidiary of Midland Bank.
Joseph indicated that the problems with sluggish price quotations experienced in a dress rehearsal of the system earlier this month had generally been cleared up. "New prices were showing up (Monday) with anywhere from two to 30 seconds' delay," he said.
Delays of up to 20 minutes plagued the dress rehearsal, causing market makers to refuse telephone calls for fear of having to deal at outdated prices and leaving brokers frustrated at their inability to complete deals.
Security Pacific Happy
Martin Pope, a market maker with Hoare Govett & Co., a subsidiary of Los Angeles-based Security Pacific National Bank, said his firm was generally pleased with the day's trading.
"We had a good day, we made money," he said. "That's what it's all about."
But, like many of his colleagues, Pope admitted that getting a feel for the mood and pace of the market from a trading room away the floor would be an adjustment.
"It was a little disorienting," he said. "I used to listen for the noise level as a clue of how hectic trading was. It's going to be an adjustment getting that off the screen.
"I also missed talking to people I may not be dealing with but who had something to say about the market," he added.
Hedging Their Bets
Some firms, however, apparently hedging against the reliability of the new technology, have maintained a large presence on the trading floor.
Smith New Court, an independent London securities house, kept 70 market makers on the trading floor Monday, the same number it had there last week.
"We feel we did a fair percentage of the trade done today," a spokesman for the firm said. "We were pleased we had people there."