Computer woes halt TSE trading
Glitch raises questions about restructuring plan
Tuesday, April 6, 1999
Richard Blackwell
The Globe and Mail
The Toronto Stock Exchange halted trading
in equities and derivatives for 2½ hours
yesterday because of a computer glitch,
enraging some market participants and
raising questions about the TSE's plans to
take over all Canadian trading in blue-chip
stocks.
The TSE pulled the plug at 10:45 a.m. local
time, and trading in equities didn't restart
until 1:15 p.m. The derivatives market
reopened at 1:30 p.m. The TSE said the
decision to shut down came after problems
developed with communications lines among
the exchange and its members through
outside service bureaus that handle order
matching.
"The technical difficulties worsened to the
point where it was determined that a 'fair
market' could no longer be sustained," the
TSE said in a release.
Spokesman Steve Kee said the shutdown
was not related to year 2000 testing, and
was not a problem with the old CATS
(computer-assisted trading system)
computers that the exchange is planning to
replace next year. However, he said the
crash may have been related to a scheduled
power shutdown that happened last Friday.
No trades were lost and none had to be
reversed, Mr. Kee said.
Whatever the cause, brokerage firms
scrambled to tell clients about the problem,
and routed trades in interlisted stocks to the
Montreal Exchange or the New York Stock
Exchange.
For some, the shutdown was unacceptable.
"It's a situation that is just intolerable," said
Peter Hickman, president of discount broker
HSBC InvestDirect Canada Inc.
"They want to be the premier exchange in
Canada, and if they're going to do that, they
have to have a reliable backup," Mr.
Hickman said.
If the TSE does become the sole Canadian
market for large-capitalization stocks as part
of the plan to revamp Canadian stock
markets, it will have to do better, he said.
"If the exchange is going to put itself in a
position where it is the only place in Canada
where you can trade those stocks, then it
behooves them to make sure they can stay
up all the time. The world is talking about
24-hour-a-day trading, and we can't even
keep it up during normal business hours. I
mean, come on, guys."
John See, president of Green Line Investor
Services Inc., the discount brokerage arm of
Toronto-Dominion Bank, said the crash
came at a bad time because yesterday's
market was very active. U.S. technology
stocks and shares in on-line brokerages were
on the rise, and some Canadian bank stocks
were jumping.
"It creates a headache," Mr. See said. "It
certainly doesn't help build confidence [in
the TSE's computers]."
Others in the investment industry were more
sanguine.
"It's clearly not a good thing," said Paul
Bates, president of Charles Schwab Canada.
"But it happens to all exchanges. No
exchange is immune. As long as the
gets back up fairly quickly, it's not
cataclysmic."
Even the world's biggest bourse has
experienced system crashes. Last October,
the NYSE was shut down for an hour after
it was hit by network communications
problems.
One institutional equity trader described
yesterday's shutdown as "frustrating" but
said that "generally the TSE has done a
pretty good job maintaining reliable
systems."
The previous major shutdown at the TSE
was just over a year ago, when the trading
system crashed for 14 minutes. In the past
decade, it has failed several times, the most
notorious being in the spring of 1997 when,
on two separate days, a flood of trading in
collapsing Bre-X Minerals Ltd. overloaded
the computers and caused them to fail.
The exchange is in the process of shifting
trading from its old CATS computers to a
new system called Torex.
"This thing [CATS] has been there since
1977," said Fred Ketchen, director of equity
trading at ScotiaMcLeod Inc. "[It's been]
upgraded, but it's still there."
Mr. Ketchen, who was chairman of the TSE
from 1993 to 1995, said he hopes Torex is
in place by the time the TSE takes over
Canada's blue-chip trading.
He said some people who are opposed to the
reorganization of the exchanges will use
yesterday's failure as ammunition in their
fight against realignment.
BUGS IN THE SYSTEM
Previous computer-related problems at the
Toronto Stock Exchange.
Aug. 16, 1989: Malfunction in TSE
computer system shuts down trading floor
for almost three hours.
Sept. 30, 1991: Trading crippled for about
20 minutes when TSE's computer-assisted
trading (CATS) system fails. At the time
about half the exchange's stocks traded on
CATS.
March 3, 1992: Software glitch records
wildly inaccurate prices and fails to print
tickets to confirm trades, forcing the TSE to
shut its trading floor for nearly four hours.
March 4, 1996: TSE investigates its
automated trading system after problems
forced it to close for most of the morning.
March 27 and April 1, 1997: Unusually
heavy trading volume related to the Bre-X
fraud crashes the TSE's computer system.
March 19, 1998: Trading system goes down
for 14 minutes in the afternoon, but is
reopened at 3:45 just before the markets
close.
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