Wall Street to roll clock ahead to check Y2K bug
New York Times - Posted at 12:30 p.m. PDT Saturday, July 11, 1998
NEW YORK -- For computer wizards on Wall Street, Monday of this
week will be Dec. 29, 1999, a step into electronic time travel that will
be studied anxiously around the globe.
After months of preparation, the United States' leading brokers, major
exchanges, clearinghouses and depository companies will begin mock
trading in the widest-ranging test yet by any industry of how well
computers will cope with the transition to the next century.
The tests, sponsored by the Securities Industry Association, are
designed to help brokers and other key players in the $270 billion
industry figure out whether their computer systems are ready to handle
trades that will settle on Jan. 3, 2000, the first business day of the new
century.
Over the next two weeks, the industry will reset the clocks on the test
computers and investigate what might happen to anyone trading stocks,
options or corporate and municipal bonds on Dec. 30 and 31, 1999, and
Jan. 3 and 4, 2000.
Not much has been left to chance. The multimillion-dollar effort is
supervised by Coopers & Lybrand following trading scripts carefully
developed by the participants with the help of outside consultants.
Thus, Leonard De Trizio, vice president at J.P. Morgan & Co. in
charge of the computers that support equity trading, knows that he will
be selling 800 shares of a fictional Big Board company with the ticker
symbol KDD at 9:30 Monday morning, and he knows that Morgan
Stanley will be buying it, while Merrill Lynch & Co. will be selling
Home Shopping Network convertible bonds to Lehman Brothers.
The participants are looking for signs of what is widely known as the
millennium bug, the catchall name for a variety of electronic foul-ups
that are likely to occur when computers fail to recognize that the first
days of the new century come after the last days of the old one. The
problem stems from the way many microprocessors and computer
programs use only two digits to refer to the year in dates -- 98 for 1998,
for example.
Many chips and programs do not accept a low number like 00 for the
year 2000 or 01 for 2001 as valid dates that follow the 99 for 1999.
What complicates the problem is that computers often react to these
unrecognized years in unpredictable ways. Some spew inaccurate data.
Others make faulty calculations. Some crash immediately. Others
appear to function normally but then cannot be restarted once they
have been shut down.
Computer specialists have talked about the millennium problem for
decades. But only recently have businesses and public officials begun
to recognize how widely dates are used in computing and to take
seriously warnings that the dawn of the new century could see
widespread disruptions in daily life, at the very least, and deadly
accidents or perhaps a global economic recession if the millennium
problem is not tamed.
Because the securities industry is the first to conduct tests involving
connections between many computer users and is publishing vast
amounts of information about the results on its World Wide Web site
(www.sia.com), year 2000 experts say that the results of these tests
could end up having a huge effect on morale in the rapidly growing
legions of specialists working on the problem.
''It's good that they are setting a standard of openness for the entire
corporate sector,'' said Edward Yardeni, chief economist of Deutsche
Bank Securities. Yardeni has become one of the highest-profile year
2000 pessimists, predicting a 70 percent chance of worldwide recession
stemming from computer problems related to the millennium.
''If it goes badly, though, corporations may be more reluctant to share
information, and more people are going to come around to my view of
the risks,'' Yardeni said.
Those managing the securities tests are discouraging any attempt to
draw broad conclusions from them. The managers point out, for
example, that the tests will deal with very small volumes of fictional
securities, and they describe the exercise as a mere dress rehearsal for
high-volume tests planned for next spring. Some major computer
systems have been completely excluded, including those that manage
dividends and interest, margin trading and client account records.
In addition, only the most common types of trades and securities will be
tested this week, although separate tests have been scheduled for
government bonds and a limited test has already been run on
mortgage-backed securities.
''Dealing with this isn't rocket science, but there is a mountain of
details,'' said Donald Kittell, the association's executive vice president.
''People don't realize that a trade may go through 40 to 50 steps from
start to finish.''
The securities companies participating in the test that starts Sunday
account for about half the trading volume in stocks, bonds, options and
other major financial instruments. Each agreed to set up a discrete
computer operation to run the tests. In the United States alone,
securities companies are expected to spend $3 billion to $5 billion
addressing year 2000 and related computer problems.
Yet, when the millennium actually arrives, Wall Street's ability to
function will depend not just on the internal systems it began to test
today but on the preparedness of markets overseas, where many
players offset any bets placed domestically.
What is more, Wall Street's success at ushering in the millennium will
also depend heavily on the year 2000 readiness of New York City's
power, water and telecommunications utilities, of the elevators leading
to the trading rooms and of countless other systems that are beyond its
ability to test.
All of this underscores what many computer experts consider one of
the most troubling aspects of the year 2000 challenge. Each phase of
the millennium problem -- from identifying vulnerable systems to
figuring out remedies to testing fixes -- has proved more complicated,
time-consuming and expensive than had been expected. The emerging
consensus has been that testing has been the most widely
underestimated challenge.
Consultants are consistently warning that very few corporations,
government agencies or other computer-dependent enterprises will end
up having enough time and resources to do as much testing as they
should. And even the best testing programs can only check through a
fraction of the scenarios that computers will encounter in daily
operations in the new century.
''It would be a setback if this doesn't go well,'' said
William Ulrich, a year 2000 consultant in Soquel, Calif.,
''because these guys are way out in front.''
MrB goes national, sees name in lights!
o~~~ O |
