Trading troubles continue on TSE : LUSENET : Grassroots Information Coordination Center (GICC) : One Thread

Thursday, October 26

Trading troubles continue on TSE

By RICHARD BLOOM Globe and Mail Update

Nortel Networks Corp. (NT-TSE) resumed trading on the Toronto Stock Exchange at this morning's opening bell, but technical problems halted it, once again, within the first moments of trading.

Wednesday, the Canadian heavyweight was halted just before noon because the TSE's computer system couldn't handle the volume of trading of the stock. Investors looking to buy or sell Nortel shares were forced to trade on the New York Stock Exchange, where Nortel is also listed.

The TSE made the same move this morning at 9:48 a.m. citing a similar glitch. It resumed trading less than one hour later at 10:40 a.m.

At 11:33 a.m. EDT, Nortel was down $6.05 at $65.05 with a volume of 6.1 million shares.,B/20001026/WMORTT_resumes_trading2?tf=RT/fullstory_Bus.html&cf=RT/config-neutral&slug=WMORTT_resumes_trading2&date=20001026&archive=RTGAM

-- Martin Thompson (, October 26, 2000


The Nortel Bombshell THE MARKET Crippled TSE system angers investors


Frantic trading in Nortel Networks Corp. shares crippled the Toronto Stock Exchange's computers yesterday, forcing the exchange to shut down the country's premier stock market and send angry investors to the rival New York Stock Exchange.

The TSE pulled the plug on Nortel trading as problems with its ragtag combination of computer systems spread to the entire market and created an environment in which all investors were not being treated equally.

The TSE's woes began the moment it opened, as the rival NYSE held back trading in Nortel for 20 minutes to give its own floor traders a chance to balance buy and sell orders. This pause sent a wave of traffic north, and the TSE was overwhelmed, with trading in Nortel and other major stocks slowing to a crawl.

By lunchtime, investors' ability to buy and sell TSE-listed stocks depended on what system they were using. The exchange halted trading in Nortel at 11:58 EST "in order to maintain a fair and orderly market in all listed stocks," leaving the field to the NYSE.

When yesterday's session ended, the NYSE had seen 123.8 million Nortel shares change hands. The TSE seized up after trading 11 million shares, and never reopened the stock after lunch. TSE executives say they expect to reopen the stock for trading today.

The huge volumes came as Nortel shares were hit hard. After falling short of analysts' revenue expectations in its quarterly report released late Tuesday, the country's largest company saw its stock drop $25.10 to $71 on the TSE. The company lost $83-billion in market capitalization.

Nortel's fall kicked off a broader selloff in tech stocks that helped drag the benchmark TSE 300-stock index down 840.26 points, an 8.12- per-cent swoon. The tech-heavy Nasdaq composite index fell 190.22 points, a 5.6-per-cent drop.

"The problem was getting trades through the TSE engine," said Adam Conyers, senior vice-president for equity trading at the TSE.

"The problem was with our order processing capacity, and we were working to expand that capacity during the day, and we'll continue to expand that capacity [overnight.]"

The TSE's failings angered investors large and small.

"This is quite disastrous for someone trying to trade," said Bruce White, a retired lawyer in Toronto who was working from his home through a discount brokerage service. Speaking at midafternoon, as he tried to buy on the NYSE, Mr. White said: "I've been trying to buy Nortel for five hours, and I'm no closer to getting my order filled. It's very frustrating."

The head of equity trading at one Bay Street brokerage house said: "This is nothing short of a national embarrassment."

Ironically, those buying or selling Nortel and other stocks on a circa-1970s system known as CATS, for computer-assisted trading system, were able to get orders filled in seconds, or a few minutes at worst. CATS is supposed to be totally retired at the end of next week, a deadline that's already been extended from Sept. 1.

However, investors channelled through brand new computer systems run by outside suppliers such as Reuters Holdings PLC and Versus Technologies Inc. hit logjams in the electronic gateway to the TSE's trading engine. Trades in Nortel and many other stocks were taking anywhere from 30 minutes to more than an hour to fill. Some brokerage houses have thrown out all their CATS terminals, and were forced to rely on the new, slow systems.

With the NYSE also processing traffic at a normal pace, investors' ability to trade stocks depended on what computers their stockbrokers were hooked up to.

Professional traders were able to exploit the gaps in prices that opened up between orders on the different systems.

"You had a situation where guys hardwired into the exchange with the old technology could jump the line, and make money trading against the rest of us," said a furious head of equity trading at one major brokerage house. "You had inequality of access, and in that situation, the TSE had to shut it down."

At another small brokerage house, with several CATS terminals, pro traders estimated they made $1-million yesterday morning trading Nortel. While happy to book the profit, one member of the team said: "It's almost criminal that the Canadian system breaks down on one-tenth the volume seen in New York. The TSE's problems are something regulators should start paying attention to."

The TSE's Mr. Conyers said the exchange is on course to fix its computers. He said: "This is not an issue of money. This is an issue of what we can do with a given computer code in a given amount of time."

This is the fifth time in a year that the TSE has been knocked out by computer glitches. The exchange opened an hour late in August; in June, Nortel trading was halted by gremlins. Last March, the exchange shut down twice in one session when computers crashed.

Partly as a result of these problems -- but also to tap into the huge pool of capital that is the U.S. market -- an increasing number of Canadian companies have listed their shares on both U.S. exchanges and the TSE.

Of the 220 companies that are interlisted, the proportion of their stock traded on the TSE has fallen to 58.9 per cent in the first nine months of 2000 from 64.3 per cent in 1999 and 67.5 per cent in 1997.

By contrast, the proportion of trading of interlisted Canadian stocks on the New York Stock Exchange has risen to 19.9 per cent this year from 13.9 per cent in 1999 and 9.6 per cent in 1997.

"Investors are going to gravitate to the market with the greatest liquidity," said the tight-lipped head of trading at one Bay Street house. "If the TSE can't get the basics right, and provide a platform where we can trade stocks, they might as well turn the lights out."

Billions erased from market cap Nortel Networks, daily share price, NT - TSE July 26, 2000 Stock close: $123.10 Market cap.: $366-billion **** Oct. 24, 2000 Stock close: $96.10 Market cap.: $286-billion **** Oct. 25, 2000 Stock close: $68 Market cap.: $202-billion Source: Datastream

-- Martin Thompson (, October 26, 2000.

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