Exchange dumps Y2K-ready system

By Chris Barton

Even though its aging automated trading system is not Year 2000 compliant, the New Zealand Stock Exchange maintains that's not the reason it's being replaced.

Managing director Bill Foster said the Year 2000 compliance that comes with the new Computershare system which will cost "in the order of millions rather than thousands of dollars" was a bonus.

He said the existing SEAT system, while not compliant according to accepted British standards requiring the ability to process dates beyond 2000, was "year 2000 ready."

The readiness had been achieved by winding back the date to 1984 on the computer system that brokers connect to trade shares.

"We don't let the clock get to 2000," said Mr Foster.

The NZSE will continue to run SEAT in parallel with the new automated share trading system (ASTS) from Computershare and will fall back to this "fix" if there are any installation delays with ASTS, scheduled to go live in the third quarter of this year.

Mr Foster said he wasn't aware of any problems with the winding-the clock-back solution which was implemented on January 11 - even though the trading system was reported to have opened prematurely that day.

But he acknowledged there had been glitches with the system in the past and that it didn't have the capacity for future growth, nor did it have the flexibility or efficiency that the NZSE now required. ASTS has the potential to accept trades directly to the NZSE via the Internet rather than through a broker's Internet site.

Mr Foster said the NZSE was currently completing Year 2000 tests with brokers on the other major component of its computer system - the FASTER market information, clearing and settlement system. So far the test had shown only "minor instances of date issues".

Meanwhile Computershare's stock continues to surge to record highs since securing the NZSE contract. Its share price late yesterday was $A13.10, up 51c from Friday when it rose above the $12 mark for the first time. The stock has more than doubled in value in five months.

As part of the New Zealand deal, Australian-based Computershare will buy 50 per cent of Wellington company Chelmer, which supplies computer systems to New Zealand's stock and futures exchanges, and Computershare's Summit accounting and administrative system for stockbrokers. Computershare also maintains the bulk of New Zealand's share registers.

The Chelmer investment will be part funded by the issue of 40,000 Computershare shares at $A10 each and an undisclosed cash payment to Chelmer's two founders.

Chelmer will maintain the NZSE trading system once it is installed.