LSE: Turquoise Halt Won't End Migrations

The London Stock Exchange is pressing ahead with migrating data clients to upgraded 1-Gigabit-per-second network circuits, while continuing to investigate a network failure that interrupted trading and data distribution on its Turquoise multilateral trading facility last week, and prompted the exchange to delay migrating its main UK equity market to the MillenniumIT technology platform already used by Turquoise.

An LSE spokesperson says preliminary investigations suggest that the Turquoise network failure-which halted trading from 8:23am until 10:30am local time on Tuesday, Nov. 2-was the result of a human error, which may have occurred under suspicious circumstances.

However, officials say an ongoing upgrade of the LSE's Extranex network - which provides consolidated access to data from its UK and Italian cash and derivatives markets, as well as from the Johannesburg Stock Exchange and Oslo Börs, which have IT partnerships with the LSE - was unrelated to the outage.

According to an LSE presentation in September, 35 customers have already ordered 1-Gigabit Extranex circuits, with the first due to go live last month. According to the presentation, recent projections indicate that Extranex's current 100 Megabit-per-second circuits will be "inadequate" by the first quarter of 2011 as intra-second bursts of more than 100 Mbps prompt corresponding latency spikes.

By delaying the migration of LSE's UK equity markets onto MillenniumIT - originally scheduled for September, and later delayed to November (IMD, July 6) - until an unspecified date in 2011, the exchange hopes to give market participants more time to prepare their own systems for the change, while also allowing for a range of network upgrades that will help ensure all participants have the necessary bandwidth required to cope with any increases in message traffic.

"Throughout this whole process we have been keen to have a dialogue about testing to make sure everyone was ready," the spokesperson says, adding that "we now need to work with customers to establish which weekend early in 2011 will work for them."

Some industry observers suggest that the migration timeline was always ambitious, since the LSE only acquired MillenniumIT in the fourth quarter of 2009.

"In my experience of... exchange system upgrades, a typical exchange system that you buy off the shelf would have a two-year implementation cycle from signing the contract to going live, so this was always an ambitious timeframe, particularly given... that Millennium did not have any previous experience of supporting an exchange of this size," says Paul Pickup, director of exchange IT consultancy Trading Technology.

In these circumstances, "configuration/ human errors can happen," especially with new systems that are not yet properly bedded-in, says Hirander Misra, chief executive of Algo Technologies and former chief operating officer at Chi-X, though he adds that the suggestion of foul play "raises some interesting questions as to who would do that, and why... and how they circumnavigated the change management controls."

According to the LSE spokesperson, UK regulator the Financial Services Authority is now conducting its own investigation into the incident, along with the exchange.