Toronto exchange closed by computer failure


By John Kipphoff
Bloomberg News
Wednesday, December 17, 2008

TORONTO -- The Toronto Stock Exchange suffered a daylong trading disruption after a computer failure prevented quotes from being disseminated, causing the worst halt for a major market since September.

Most trading on Canada’s biggest stock market didn't begin on schedule at 9:30 a.m. in Toronto, and buying and selling was halted about 20 minutes later. An hour before the session normally ends at 4 p.m., TMX Group Inc. said the bourse would remain shut. It plans to reopen tomorrow, Toronto-based TMX said in statement.

"This is the worst interruption that I have ever seen," said John Aiken, a Toronto-based analyst at Dundee Securities Corp. "Losing trading revenues for a day doesn't hurt TMX earnings, but the implication for spurring on dealers to use other platforms will definitely hurt TMX."

Canada is the world's eighth-largest stock market, with its shares worth $643 billion, according to data compiled by Bloomberg. The London Stock Exchange, which operates in the third-biggest nation, had a seven-hour interruption of trading in September. The Tokyo Stock Exchange suspended business in November 2005 and January 2006 because of computer failures.

Trading at the Montreal Exchange, Canada's futures and options bourse, was also affected today because it relies on the same data as the Toronto Stock Exchange, Montreal-based TMX spokesman Jean-Charles Robillard said in an e-mail. He declined to elaborate.

This was the longest trading halt for the Toronto Stock Exchange since at least April 1997, when the trading floor closed and electronic trading began, TMX spokeswoman Carolyn Quick said in an e-mail. In October 2000, trading was interrupted for four hours as an unprecedented number of orders for Nortel Networks Corp. exceeded the capacity of the computer system.

Research In Motion Ltd., the Waterloo, Ontario-based maker of the BlackBerry phone, also trades in the U.S. The shares increased 1.8 percent to $40.67 in Nasdaq Stock Market composite trading, as 22.9 million changed hands. In Canada, only 156,000 Research In Motion shares traded, 95 percent less than the three- month daily average.

The trades that took place in the morning before the interruption won't be canceled, said Connie Craddock, spokeswoman for the Investment Industry Regulatory Organization of Canada, the nation’s stock-trading regulator.

Four alternative trading systems have launched in Canada since September 2007. The newer systems are Alpha Trading Systems, whose owners include Royal Bank of Canada and Toronto- Dominion Bank; Pure Trading, owned by the Canadian National Stock Exchange; Perimeter Financial Corp.'s Omega ATS; and Chi-X Canada, owned by Nomura Holdings Inc.'s Instinet.

Interruptions on the Toronto Stock Exchange were frequent in the late 1990s, when "the old systems of the exchange collapsed under the weight of the tech bubble," said Paul Hand, managing director of equity trading at RBC Capital Markets in Toronto. TMX Group has upgraded systems since then and it has been "mostly going pretty well," he said.

There have been other interruptions to trading this year on the Toronto Stock Exchange as TMX introduced a new trading engine, called Quantum, and new order routing technology to fend off burgeoning competition from alternative markets. Trading in 85 stocks was interrupted for as much as two hours on Oct. 14 because of unspecified technical problems.

Canada's stock benchmark, the Standard & Poor's/TSX Composite Index, has tumbled 37 percent in 2008. That would be the steepest annual decline since 1931.

"This comes at a bad time," said Sebastian van Berkom, who oversees about C$1 billion in small-company stocks as president of Van Berkom & Associates Inc. in Montreal. "We are missing out on buying opportunities. It's a terrible inconvenience."

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