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(CORRECTED)-Traders fear glitches in next frenzy
Reuters Story - November 05, 1997 19:58
%STX %FIN %ELC %US %DRU %INS %BUS CPQ RTR.L DELL SCH OXHP V%REUTER P%RTR
NEW YORK, Nov 2 (Reuters) - A few days after record
trading volume strained the computer that tabulates the Nasdaq
Market's Composite Index, traders fear technical glitches in
Nasdaq's computer systems will prevent them from properly
executing buy-and-sell orders in another market frenzy.
"For systems just to be able to accept customers' orders,
they are going to need a major overhaul," Bill Sulya, director
of trading at A.G. Edwards & Sons said.
Sulya said that on Tuesday, when a record 1.375 billion
shares changed hands amid the Nasdaq's biggest one-day point
gain ever, some traders waited nearly an hour to see the prices
at which they executed their trades.
According to Sulya, in a full-scale market panic, "You
might term that as a mini-disaster."
A Nasdaq spokesman said Nasdaq's trading systems
currently contain no technical glitches, and did not before
Tuesday's record volume.
According to the spokesman, as trading volume increased
on Tuesday, Nasdaq added capacity to its automated confirmation
transaction system to accommodate more trades. Originally set
to handle one million trades, the system's capacity was boosted
to five million after the additional capacity was added.
"We have no plans to modify our system in the near-term,"
the spokesman said. "We did it that day (Tuesday) and that
evening."
Norman Goldberg, vice president of financial services
industry marketing for Tandem Computers Inc. , said
Nasdaq's hardware operated well under the heavy volume. Tandem,
a unit of Compaq Computer Corp., provides computers to Nasdaq.
"Nasdaq has been progressively adding hardware to handle
volume growth," Goldberg said. (Corrects quotations to show
Goldberg was discussing Nasdaq hardware)
Nasdaq, for its part, said it has invested nearly $500
million since the 1987 stock market crash, including $50
million the last three years, to boost its capacity to handle
heavy trading volume. That annual spending trend should
continue, a Nasdaq spokesman said.
Since Tuesday, traders said they have had little trouble
executing trades on Nasdaq or elsewhere. Still, the surge of
opening-bell trades throughout the week forced exchanges like
Nasdaq to make some minor adjustments.
In before-the-bell trading on Thursday, Nasdaq took the
system that quotes other markets' shares on Nasdaq terminals,
called ITS -- or intermarket trading system -- off-line for
five to 10 minutes to free up capacity for stock quotes,
according to a Nasdaq spokesman.
Trading was not affected, he said.
When trading began that day, U.S. stocks plunged initially
amid concern over Brazil's currency, before bouncing back soon
thereafter and then falling again to close the day lower. The
early rush to sell showed that heavy volume bursts pose
technical concerns not only for Nasdaq, but for all of Wall
Street, traders and investors said.
Reuters Holdings Plc's Instinet terminals, which
handle a large amount of institutional trading each day, went
down early on Thursday, compounding problems for investors
trading options in Dell Computer Corp , which was then
Nasdaq's most active stock.
An Instinet spokesman said that during the past week,
Instinet's systems were marginally affected by the heavy volume
in global markets, as were other brokers' technology, along
with markets and exchanges around the world.
Specifically regarding Dell, "Instinet's clients were
only unable to trade for a brief period Thursday," the
spokesman said. "(Dell's) stock, however, continued to trade
through other brokers," he added.
The heavy volume created problems for investors trading
through discount broker Charles Schwab Corp. , too.
On Thursday, investors using Schawb's telebroker service to
trade shares of Oxford Health Plans Inc. , whose shares
lost nealy two-thirds of their value during Monday's market
selloff, got a message telling them their trades could not be
processed due to the stock's heavy volume.
According to a Schwab spokeswoman, the message should not
have been there at the time.
"We've left the messages on that we've had running
Monday, Tuesday and Wednesday, because it takes us a very long
time to put those messages up on telebroker," the spokeswoman
said.
"But now we are back to normal levels, nobody is waiting
at all," she added.
Jack Bayer, head over-the-counter trader at Oppenheimer
& Co., said on Friday that all trading systems he encountered
that day were working fine, although perhaps that was because
trading was comparatively light. He said that on Tuesday, it
was Oppenheimer's own in-house system -- not Nasdaq's or any
other system -- that went haywire.
Late on Friday, he summed up the massive-volume trading
week, saying, "This week was like one long root canal --
without novocaine."
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