London Stock Exchange in denial over system outage

LONDON – The London Stock Exchange (LSE) has failed spell out to the markets the precise cause of last week’s catastrophic seven hour trading outage.

The exchange carried out a series of upgrades and tests the weekend of Sept. 6-7, but all LSE representatives are saying is that “there was a combination of software activities that coincided,” and these had caused the problem.

The stock exchange has reiterated that the fault was not due to an upgrade on its high-speed trading platform TradElect. The LSE has planned a series of intensive tests on its systems throughout September as it works on integrating Borsa Italiana, the Italian stock market it acquired in January.

Over the Sept. 6-7 weekend the exchange conducted the first phase of a trial to link Borsa Italiana to the LSE’s stock trading and market data on the TradElect system and Infolect, its information-broadcast system. The exchange denied this trial was linked to last Mondays’ problems, but it would not give details of the tests. It is understood more tests are scheduled each Saturday this month.

The LSE also plans to upgrade the messaging capability on TradElect, but said there had been no upgrade that was responsible for the problems. The exchange regularly conducts small upgrades on the trading platform.

The LSE has said network software issues were to blame and on Wednesday, the Financial Times suggested that the problems could have occurred between the LSE’s Extranex private network (which links the exchange and clients) and the trading gateway to TradElect.

Cisco SONA, or service oriented network architecture, is in use extensively at the exchange. Cisco had not returned calls at the time of writing.

The LSE absolved its core TradElect platform from blame. The system, designed and built by Accenture, runs on HP ProLiant Servers and Microsoft .Net and SQL Server 2000 systems. Accenture declined to comment on Monday’s events. The LSE said, “we won’t discuss dealings with our individual suppliers.”

Bob McDowall, senior analyst at Tower Group, said sparse explanations provided by the LSE so far were “not very satisfactory.” A software fix was applied last Monday and the LSE said it remained “confident the market will work.”

The outage had echoes the uneasy launch of TradElect last year. The exchange suffered its first computer crash in seven years on Nov. 7, 2007.

That crash came at an unfortunate time, both soon after the introduction of new European trading directive MiFID, and as the exchange was rolling out TradElect, which was the culmination of a four-year IT overhaul. At the time, the exchange said the fault was in its Infolect platform.

The Financial Services Authority, the U.K.’s market watchdog, denied it was formally investigating Monday’s failure. When the FSA was asked if it would require the LSE to make public its analysis of the cause of the crash, it said such discussions, if necessary, would be held behind closed doors.

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