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Shares plunge as LSE halts trading for 3.5 hours

Friday 27th November 2009

Trading on the London Stock Exchange began again on Thursday afternoon after a technology glitch forced the Stock Market to stop transactions for three and a half hours.

The outage is the latest in a string of technical problems at European exchanges in recent months and and was the worst since an almost day-long closure of the LSE in September last year.

In a statement the LSE said the problem began when client connectivity issues spread more widely affecting numerous client connections to UK securities.

It said: “To ensure an orderly market, the Exchange took the decision to place the London market into an auction at 10:33, which had the effect of halting trading but allowed clients to continue to interact with orders on the system.”

Trading resumed again at 14.00 hours and Xavier Rolet, CEO of the London Stock Exchange, said: "We regret the inconvenience that today's disruption to trading has caused for our clients. Having resolved the immediate issue, we are working hard to ensure this doesn't happen again ahead of switching to MillenniumIT's trading platform next year."

It was not clear whether trading had migrated to any significant extent to rival platforms such as Chi-X Europe and BATS Europe, a US-based operator that seized on the LSE’s woes in the morning to advertise that its platform remained open for business.

During the LSE’s last serious outage in September, traders largely chose not to trade rather than shift wholesale to rivals on the grounds that the LSE, having by far the largest market share, was still the benchmark for reliable pricing.

However, its market share has fallen 60 per cent in FTSE 100 stocks since Chi-X has captured 25 per cent of the FTSE 100, while BATS has almost 8 per cent.
During the system failure, LSE said all trades had been put into “auction” mode, where orders can still be placed but none is actually executed, during the outage.

Simultaneously, LSE’s own share price dropped sharply on investor concerns over the status of its largest, Dubai-based shareholder.

Earlier, the exchange’s shares fell by as much as 8.8 per cent, partly over concerns that Borse Dubai, the LSE’s largest shareholder, might be forced to sell its stake amid fears of a default by the emirate.

The shares eventually closed down 60p, or 7.3 per cent, at 754.5p.