London Stock Exchange: What really went wrong

London Stock Exchange: What really went wrong

Vendor and exchange IT interface chaos leads to disparities in share prices and volumes

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The London Stock Exchange has made a U-turn on the system requirements placed on data vendors such as Thomson Reuters, Interactive Data and Bloomberg, after three weeks of problems since the launch of its new trading platform.

The decision, to fundamentally change the timing and systems around closing share price data recording, was made following a heated meeting with the providers that addressed significant disparities in quoted share prices.

The move has been widely welcomed by vendors, which provide share price data from the LSE to traders, and compete on speed and quality. A number of them had expressed real opposition to the changes that the LSE pushed through as it moved to a new platform. The exchange declined to comment on the issue.

The LSE set its new Linux-based, C++ written matching engine, Millennium Exchange, live on 14 February. The problems after the launch, including a four-hour outage last week, highlight a number of technology and project management issues – as well as what appear to be efforts by some organisations to establish who has the final say in technology changes around the exchange.

A rule had come into force with the new platform that vendors had to set their systems to report closing prices at 16.30 each day – after the end of normal trading but before the daily closing auction.

This week, the LSE hosted an emergency conference call with vendors – including Thomson Reuters, Interactive Data, Morningstar and SIX Telekurs – to address the data problems. On the call, held on Tuesday, data providers said the changes were leading to serious share price problems.

The LSE’s rule, insisting on taking closing prices at 16.30, has now been abandoned. The exchange has reverted to allowing price data to be recorded after the closing auction – in accordance with traditional ways of working.

The changes – and the apparent lack of system readiness among vendors – had led to what market participants described as “alarming” price disparities between the data firms. A number of vendors even displayed blank prices on top traded stocks such as the Royal Bank of Scotland and Vodafone.

Of the vendors that had changed to take prices at 16.30, some later undid the modification after finding that others had not followed the same steps, sources said.

Several providers made it clear they felt incensed about the mandated switch of closing time data to 16.30, which came with the system change.

“Clients have years and years behind them of doing it the previous way,” said a source at a smaller data provider. “The exchange can’t just turn the market round like that without proper consultation.”

“The larger vendors too, with many different price feeds, are bound to see it as a major change,” said another. “It would take teams of people to fix it.”

Other providers felt the change to procedures was simple and did not bring with it much coding effort. “If you want to do business with the exchange you accept simple change requirements, even if it means dealing with your own legacy systems,” said a mid-sized vendor. “We can either stamp our feet like spoiled children or just get on with it.”

The stock exchange’s concession on closing price timing was a major step and was useful in helping solve some of the key issues, the vendors agreed.

A spokesperson at SIX Telekurs UK said the company was pleased the LSE “will now allow vendors to publish a closing Best Bid Offer price that it is in line with previous market convention”.

“We made the change early on, with very few problems,” added Morningstar. Bloomberg has not yet provided comment.

Thomson Reuters and Interactive Data did not comment on the meeting. They implemented changes around a week after the launch.

Daniel Muri, head of product development at Sayula, a benchmarking firm that measures the data quality and latency from vendors, said the volume problems among vendors had emerged early on: “From the first day of trading on the new system there was a problem, and we could see on our market data monitor, iMonIT, that something was not right. Vendors were showing missing and inaccurate data of traded shares.”

Since vendors began making the changes, data has been improving, he said. “We have a view right across vendors and we can see volumes are more in line after the patches were applied. But there are still issues, and we’re offering our data to those companies to help them be sure of their accuracy.”

Computerworld UK understands that during Tuesday’s conference call the LSE came under significant pressure, from the market’s largest data vendors, to remove the requirements that came in with the new system.

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Comments

  • David Dolphin I dont understand the technical problem The legacy systems want to take a price at a time after 1635 but the LSE insisted on only offering the price at 1630 How long was the time window they were offering secondsIf the LSE were offering a tiny window of opportunity say 30 seconds then why wouldnt one of the FS software firms grab the values in this window and then offer them to the other software providers who might be trying to access them after this window One could charge for this caching serviceBut its also not clear from the article why offering data at 1630 would be a problem for someone who wanted to access it after this time Surely the stock exchange dont allow access for only 30 seconds do they
  • Lord_beavis We can either stamp our feet like spoiled children or just get on with itSounds almost like the lone voice of reasonWhen we upgraded our MS Office suite where I work from 2003 to 2007 there was a lot of gnashing of teeth and wringing of hands But in the end we are now and Office 2007 shop
  • John Travel As someone who has worked with a couple of these major vendors before I can understand the problems the LSE would have in working with these people There is no excuse for this the vendors had plenty of time and it should have been a priority The changes were not huge but getting them signed off can take a long time with traders and managers dragging their feet It is a disgrace and unfortunately makes LSE look bad There is little they could have done better
  • Jerry Kreps However the largest vendors may have missed misinterpreted or in some cases decided not to comply with the instructionsBeing traders they are intelligent people Taking this approach suggests they want to manipulate the timing of when prices changes are displayed Computerworld UK has been contacted by traders and IT suppliers who have angrily complained of the challenges dealing with the new setupAn orchestrated attack Seems like it Reminds me of when Peter Quinn Mass state CIO adopted the Open Document Format so citizens wouldnt have to buy expensive proprietary software in order to read official government documents and to be sure that archived documents could be read by future citizens As part of the attack against Quinn planted stories in the states leading newspaper made accusations against him which a subsequent investigation revealed were without merit but not before orchestrated pressure forced him to resign Quinn also had to contend with certain state legislators who didnt approve funding for technology initiatives that included the expansion of web-based services for citizens Since then various free word processing applications have enabled reading doc and docx formats and Quinn has moved on to better jobs The only losers were the taxpayers of Mass who have to fund massive annual license fees for proprietary word processors Seems like the Slog the Stacked Panel astroturfed complaints and bogus charges are still the norm when one competes against a certain corporation
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