Glitch adds to pressure on LSE

Growing competition means the London Stock Exchange can ill afford any more outages

Traders have yet to get a clear explanation for why the LSE system went down

The IT problems that stopped the London Stock Exchange (LSE) trading for several hours last week highlight the importance of disaster recovery in the newly-competitive equities market.

The LSE is being cautious about stating what exactly prevented traders accessing its platform.

“The problem was caused by a combination of technical events that occurred simultaneously and impacted the stability of the connection between exchange member firms and trading gateways,” said an LSE statement to traders.

Speculation on the cause has been rife. Some say the system was groaning under the weight of early trading volumes caused by investors eager to profit from the bail-out of US mortgage companies Fannie Mae and Freddie Mac.

Others say an initiative that allows customers to put hardware in the LSE’s datacentre to improve trading speeds is probably responsible.

A third view says an ongoing project to migrate equities trading from the Italian Borsa exchange onto the London systems could have had an affect.

But most consternation was caused by an apparent lack of backup and disaster recovery.

Recent European legislation opened the market for competitors to challenge the traditional exchanges. After the LSE incident, rival platforms were quick to affirm their reliability. Chi-x, for example, has a datacentre in London and one in Frankfurt, each running a simultaneous mirrored backup. The platform also has fully redundant communication links ­ meaning traders can use another channel if one goes down.

“Everything is running live so in the event of a problem we can have a smooth switchover,” said Chi-x chief operating officer, Hirander Misra.

Like the LSE, Chi-x keeps its IT in-house. Conversely, Turquoise ­ an exchange formed by several investment banks that started trading this month ­ has its infrastructure hosted by a supplier that guarantees 99.99 per cent uptime.

The exchanges can expect to be judged on the efficiency of their services.

“The LSE was already getting a bad rap,” said one trader. “It’s still too big to ignore, but in future people will be thinking about going elsewhere.”