Software upgrade goes wrong for stock exchange

By PETER GRIFFIN

Yesterday's software upgrade gone wrong reminded the financial industry of its dependence on technology in an increasingly automated world.

The conduit of international change, the world's stock exchanges are based on complicated IT systems which are expected to maintain the same level of reliability as electricity or telephone networks.

Ironically, the last two weeks have seen cases where all of those types of networks have collapsed in unrelated episodes.

Electricity blackouts on the East Coast of the US caused chaos last week, but had minimal impact on the main financial exchanges, which were prepared to power their trading boards with diesel generators.

Earlier this week Telecom New Zealand was still cleaning up the mess after a software upgrade corrupted the memory of thousands of its payphones making them useless.

The NZX's markets development manager Geoff Brown said outages were a part of life for exchanges. The NZX did have service level agreements with its partners that aimed to maintain service "up-time" in the high 90 per cent range. The latest outage had resulted in inconvenience rather than tangible losses.

"We'll look closely at what we need to do in order for these sorts of things not to occur," he said.

Still, the implications of the exchange closing as important business news hits the market, are great enough for the exchange to take even short outages seriously.

But the electronic nature of the markets meant traders were often able to make up for lost time.

While the NZX had relatively light turnover yesterday of $58 million worth of ordinary shares and $6 million worth of debt, Brown pointed out that on the day of an outage in May, the exchange still managed to have its largest day of trading in six months.

Brown said brokers had been understanding about the outage.

"No one was critical of the decision to close the market albeit it was inconvenient."

Generally the impact on the financial markets is greater when the major exchanges cease trading unexpectedly. The New York Stock Exchange has had disruptive network outages over the years as the result of software glitches and computer failures which although brief in nature, have interrupted trade on a global level.