The shutdown of the Tokyo Stock Exchange this month, caused by the biggest computer failure in its 56-year history, highlights the risks to the London Stock Exchange’s (LSE) technology plans.

The LSE is three years into a four-year programme to switch to an entirely new IT platform, moving away from reliable but expensive high-end servers onto low-cost, commodity hardware, based on Microsoft software.

For the Exchange and its technology partners this is uncharted territory. Working closely with Accenture, the LSE is using Microsoft’s .Net platform in what is probably its highest-profile and most mission-critical environment yet.

LSE chief information officer David Lester goes so far as to describe Accenture’s efforts on the company’s Technology Roadmap (TRM) project as ‘a master feat of modern computer engineering’.

And while it is still early days, the switch is set to provide significant benefits.
So far, 53 of its 65 systems have been migrated to the Microsoft environment, with the final and most crucial part – the new trading system – to be built by the end of the year, although it will not go live until early 2007.

The system’s capacity has already increased six-fold, while the latest component to go live – the Infolect market information system – has cut by more than 90 per cent the time it takes to broadcast data to customers.

When the final elements of the TRM go live, Lester says it will take 20 per cent off the Exchange’s £40m annual IT bill – a saving of some £8m a year.

‘The roadmap is about providing even higher-performance systems, and being able to scale and provide capacity at a fraction of the cost,’ said Lester.

As well as cutting costs and time, while scaling capacity to support constantly rising volumes of trading on the Exchange, the system is also enabling the LSE to branch out into new lines of products and services.

‘With the new trading system we will be able to add multi-asset classes for the first time, such as fixed income and derivatives trading, which we couldn’t do before,’ said Lester.

But while this has done much to advance the LSE’s performance, scalability, cheapness and ability to add new products and services, it will only make a major difference if the system proves its reliability and robustness over the long term.

A new form of accountability
The Tokyo Stock Exchange’s (TSE) response to its worst computer crash in operational history took an unusual turn last week.

Senior executives will take temporary pay cuts of between 10 and 50 per cent of their salaries as a punitive measure.

Systems chief Tomio Amano will receive a 30 per cent cut over six months, while both the TSE’s president and its chairman will take a salary drop of 50 per cent over the same period. Seven other operating officers will also take cuts of between 10 and 20 per cent.

Fujitsu, the vendor whose software was responsible for the system failure, says that it is considering reducing pay for its own executives.

The LSE technology roadmap
* 2003 LSE commences its technology roadmap with the introduction of a data warehouse, increasing the range of market data it delivers to investors and other
market participants

* Jun 2004 Enhancements to the data warehouse are completed to improve historic product offerings

* Sep 2005 New Infolect market information system replaces the LSE’s London Market Information Link (LMIL)

* 2006 New trading platform undergoes testing and parallel running

* Early 2007 Implementation of new trading platform to replace existing Sequence system.