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What a week. The last time I recall the Stock Exchange being unable to

operate was in the aftermath of a hurricane that scythed its way through

South-east England, blocking roads and railway lines and preventing dealers

from arriving at work. It was unfortunate that the October 1987 storm took

place just before one of the biggest ever falls on Wall Street. The closure

of the London market that Friday meant that shares had a lot of catching up

to do on the following Monday – on the downside. The inability of the Stock

Exchange to facilitate trading last Wednesday may not have had quite such

dramatic consequences but was unfortunate nonetheless.

Last week&#39s systems debacle found dealers twiddling their thumbs for most

of the day. The announcement at 12.22pm that there was no chance of trading

being possible for three hours led to doors being jammed in the rush to hit

the bars while there was still time. It was difficult to begrudge them a

long lunch. Several of the dealers on our trading floor had tickets for the

Chelsea match which, given the talk of extending trading hours into the

evening to cope with the backlog of orders (which is what happened) must

have meant that few expected to be present at Stamford Bridge.

There was a trio of unfortunate coincidences for the Stock Exchange on

that difficult day. The Nasdaq had enjoyed extremely volatile conditions

the previous day, swiftly dubbed “Charcoal Tuesday” by the Americans. While

the final fall was relatively modest (at one stage, prices were more than

13 per cent off) there was speculation that an end-of-tax-year sell-off of

technology stocks would take place in the UK. But for many investors, the

chance would have been a fine thing.

The next unfortunate coincidence – that Wednesday was, indeed, the last

day of the financial year – resulted in considerable anguish for private

investors and their advisers. Any final capital gains tax avoidance

measures had to be completed during that day&#39s trading – no easy matter if

the markets are closed. The sense of frustration was palpable and, although

the ultimate real cost to private investors was probably small, it must

have been very aggravating to find that you could not have your trades


The events demonstrated the importance of technology in markets. Most

brokers dealing with private investors channel their business through

retail service providers – market-makers who guarantee best execution of

orders that are fed to them. As the orders are delivered electronically, it

is a little like a pipe into which you pour purchases and sales on behalf

of your clients. The pipes were filling nicely during last Wednesday but,

of course, the taps could only be turned on at 3.45pm when the market

opened. Unfortunately, the taps automatically turned off at 4.30pm when

trading usually finished. The fact that market hours were extended to 8pm

meant that dealers had to resort to the practice of ringing up

market-makers to place orders, slowing the whole process.

Conspiracy theories abounded as the inquest continued into what happened.

Could it be that a frustrated technology investor, angered at losses

incurred during recent trading, had hacked into the Stock Exchange&#39s

computer? The conjunction of planets was cited as a reason while,

apparently, a helicopter was seen hovering silently over the Exchange. The

best suggestion, though, was that this would never have happened if we had

maintained floor trading, so we should set up a new market in the

Millennium Dome.

The contrast between the deluge of media interest and the actual outturn

of events suggests this was about as big a storm in a teacup as you could

find. Don&#39t forget that the next few weeks are the time to be taking out

your 2000/01 Isa, not April next year. The downward spiral in technology

shares is postponed – perhaps temporarily. This promises to be an

interesting tax year for investors.


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