The London Stock Exchange Crash: Who Was to Blame?

On the Monday after the U.S. Government announced that it was stepping in to assume control of Freddie Mac and Fannie Mae -- two institutions tasked with securing billions (if not trillions) of dollars in mortgage debt -- traders and investors on the London Stock Exchange (LSE) were looking forward to reaping the rewards of the surging markets reacting to the news. That was never to be, as the LSE (as reported by Reuters) suffered a technology glitch that caused a halt to trading for more than seven hours, and wiped out millions in potential investment income.

Information about what specifically caused the crash has been slow to emerge, although the LSE did tell ComputerworldUK that the the crash was caused by a "a combination of software activities that coincided," and that a planned upgrade to TradElect -- the LSE's stock trading system -- didn't cause the outage.

So what exactly is TradElect? According to a June 2007 post at OnWindows.com, TradElect is a "new technology platform has been developed using the Microsoft .NET Framework, with support from Microsoft and Accenture, and marks the final phase of the Exchange's four-year Technology Road Map project. TradElect enables significant increases in both speed of trading and system capacity."

Microsoft and consulting partner Accenture also worked together on Infolect, another project for the LSE that was intended as a "scalable, reliable, high-performance stock exchange ticker plant to replace its earlier system", according to a Microsoft white paper. That same white paper explains that Infolect was built using Windows Server 2003, SQL Server 2000, and a custom .NET application.

The LSE's unclear statements about what specifically caused the crash has fueled speculation on the Internet that Microsoft was to blame, with Stephen J. Vaughn-Nicholas at Computerworld arguing that the ".NET Framework is simply incapable of performing this kind of work, and SQL Server 2000, or any version of SQL Server really, can't possibly handle the world's number three stock exchange's transaction load on a consistent basis."

Marc Chacksfield at TechRadar interviewed Bob Dowson, Operations Director of Site Confidence, a UK-based website monitoring firm, who said "I imagine that rival trading platforms will have benefited all day from the LSE outage. Hopefully this incident will serve as a rather high-profile lesson for other organisations."

To be fair, Microsoft wasn't the only vendor involved in building out the TradElect system and supporting the IT infrastructure underpinning the LSE. HP issued a press release on July 1st, 2006 which claimed the "London Stock Exchange Becomes World’s Fastest with HP and Microsoft Technology", while a commenter on Mary-Jo Foley's All About Microsoft blog pointed out that IT consultancy Avanade -- a joint venture between Microsoft and Accenture -- was also involved with developing trading solutions for the LSE. According to Avanade's case study on their LSE work, the firm used Microsoft SQL Server 2000 and Windows 2000 Advanced Server and Datacenter Server for the LSE's RSP Gateway. Accenture helped Microsoft develop the TradeElect platform, and promoted their involvement in the LSE deal with their own case study.

But Microsoft promoted its involvement with the LSE more than any other tech vendor, with marketing collateral that included published whitepapers (viewable here) extolling the benefits of the LSE trading platform using a solution that is based on Windows Server 2003 rather than linux alternatives. Microsoft also touted the LSE deal in a variety of advertisements, including a faux newspaper graphic entitled "The Highly Reliable Times" that featured headlines reading "London Stock Exchange Chooses Windows over Linux for Reliability" and included quotes from LSE CIO David Lester saying "We looked at a number of different platforms for our technology roadmap...and Windows Server was the clear choice." Here's a copy of the ad, below.

Perhaps most embarrassing for Microsoft was a promotional video produced to describe the LSE’s decision to move their trading platform to Windows Server. It's a short video clip--a little more than 3 minutes long--but it's filled with quotes and assurances about the reliability and performance of Windows Server. You can see a copy of the video here.

We asked a Microsoft PR representative for Microsoft's perspective on the LSE trading system crash story, but we haven't yet received a reponse. If and when we do receive a reply we'll post it here.

While the facts of the situation have been slow to emerge, is is true that Microsoft (and by extension, Accenture and Avanade) invested heavily in promoting their involvement with the LSE. That puts Microsoft in the unenviable position of having two bad options to consider: accept that a high-profile IT system failure occured that either relied on Microsoft products or the consulting advice of Microsoft partners Avanade and Accenture, or B) let the blame fall on the LSE staff managing the platform, hereby exposing a valuable customer to the ire of angry stock traders. The LSE trading system crash has proven that while customer case studies and white papers involving high-profile clients can be a valuable sales tool, they can also make a damaging story even more so when things go awry.

Update: Added information about and link to the Infolect white paper on the Microsoft UK website.