Year 2000 test to start sweeping Wall Street
By Jennifer Westhoven
NEW YORK, March 5 (Reuters) - Stock brokerages will be putting in extra hours this Saturday, as the industry kicks off a six-week-long test to ensure that the myriad of computers that link up Wall Street will be safe from the millennium bug.
The ''Street-wide'' tests will take place on six Saturdays at more than 400 brokerage firms, said the Securities Industry Association (SIA), the industry trade group that designed and organized the test.
The tests are crucial because the world's financial markets have become so closely connected by computers that blackouts in one big area or firm could rock financial markets when they open for trading on Monday, Jan. 3, 2000.
The ''Y2K'' problem, short for Year 2000, threatens to crash computers on New Year's Day because a programming defect may read January 1, 2000, as January 1, 1900.
The SIA first ran the test in July among some of its top firms, U.S. stock markets and clearing and settlement companies. That checked the progress of some of the world's biggest financial institutions, plus checked to make sure the test itself was sound. The ''dress rehearsal'' went well, but now the test must scan systems that are likely to have far more faults, since small firms have less money to spend heading off the problem.
''The magnitude and complexity of the industrywide test is unlike anything the securities industry has tackled before,'' said Donald Kittell, executive vice president of the SIA.
The test actually simulates the date roll-over by fooling the computers into thinking each test day is a day near the millennium. On March 6, for example, computers will act as though it is December 29; on March 13, they will think it is December 30, and so on.
The test will involve stock trading as well as the settlement and clearing of trades.
Results will not be released until April, but the consensus is that it should run relatively smoothly, with glitches that crop up being fixed in time for the big day.
Many firms have contingency plans. For example, Merrill Lynch and Co. Inc. (NYSE:MER - news) has said it will not do business with brokers that do not show any improvement after the industry-wide testing.
''Many of the scarier stories being told about Y2K involve the banking and financial system,'' said Edward Boehne, president of the Federal Reserve Bank of Philadelphia.
''In fact, the financial industry is doing one of the best jobs to ensure that the arrival of the year 2000 is a manageable event,'' he said in a speech to business leaders in Reading, Pa., on Friday.
The securities industry as a whole is estimated to be spending up to $6 billion in an extensive program to ensure computer systems will not crash.
Kittell said the test would also be a good model as the industry readies for decimalization next year, when stock prices will trade in pennies instead of in sixteenths, and for ''T+1'' settlement.
''T+1'' stands for ''Trade plus One day for settlement''. Currently stock trades must be settled in three days (''T+3''), but the industry is moving to close the grap between the trade and the settlement.
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