The London Stock Exchange was paralysed by a computer failure on 5 April 2000 which prevented trading until late afternoon. Computers were showing price information.
The problems were exacerbated by the fact that this was the last day of the tax year when many taxpayers were seeking to sell investments to utilise their capital gains tax annual allowance, and many institutions were buying to meet the last minute rush for individual savings accounts. The Stock Exchange extended the trading day to 8pm, but the government refused to extend the tax year, though they considered it.
The problem was further exacerbated by huge swings in high technology stocks the day before. Two stock exchange practices, known as trigger-selling and bottom-fishing, largely cancelled each other out. Trigger selling is when computers are set to sell stocks when they fall below a set price or parameter. Bottom-fishing is when these stocks are bought because they are seen as good value.
The biggest casualty of the day was the stock exchange’s reputation. Investors wondered why the system crashed for no obvious reason. The previous shutdown in 1987 was triggered by hurricane-force storms which brought down power lines and disrupted transport. Investors also wondered why there was no adequate back-up system.
[2000]