Trading in U.K. small-caps halted as London Stock Exchange suffers third outage in as many months

By Jamie Chisholm

Traders in shares of smaller U.K. companies were left frustrated Tuesday after the London Stock Exchange suffered its third outage in as many months.

Dealing in about 2,000 smaller stocks came to a halt about an hour after the market's 8 a.m. London open (3 a.m. Eastern), stalling the FTSE Smallcap Index, as the bourse operator said it was "investigating an incident."

Investors were still able to trade in the constituents of the large-cap FTSE 100, the mid-cap FTSE 250 and the International Order Book, which offers access to global depositary receipts, the LSE stressed.

Live orders remained on the system and by 10:17 a.m. the LSE said that all "Impacted securities are now in regular trading," but about an hour later there was another problem accessing smaller stocks.

The outage represents another embarrassment for the bourse following recent trading halts. In October, dealing in hundreds of smaller stocks suffered an outage in the last 80 minutes of a session, and in November the LSE's FTSE Russell indexes were halted for 40-minutes.

The halt may compromise London's attempts to attract more companies and traders as the bourse struggles to secure initial public offerings and investors apply a discount to the U.K. market as a whole. The FTSE 100 , for example, is trading on a forward price/earnings ratio of 10.6, while Germany is on 11.5 and the S&P 500 SPX in the U.S. is on 18.9, according to Factset.

However, the London Stock Exchange now represents a small proportion of the LSE Group, with the listing and trading of cash equities accounting for about 4% of group revenues and the majority of income is derived from its data and analytics business following its $27 billion acquisition of Refinitiv in 2019.

That's helped LSEG shares (UK:LSEG) gain 25% so far in 2023, though they dipped by about 1% on Tuesday as the outage dragged on.

As trading progressed in U.K. blue chips the mood was downbeat, leaving the FTSE 100 UK:UKX off 0.6% as interest rate-sensitive sectors like real estate welcomed falling bond yields, but miners were hit by concerns about waning demand from a struggling Chinese economy.

Banks were under pressure after it emerged that Qatar's wealth fund sold 361.7 million shares in Barclays (BCS) (UK:BARC), representing half its stake, pushing shares in the bank down 2.5%.

Frances's CAC 40 FR:PX1 added 0.3% and Germany's DAX index DX:DAX climbing 0.2%, leaving both just shy of the record highs touched earlier this year.

The DAX has jumped 8.5% over just the last month as German benchmark bond yields have fallen sharply amid hopes the European Central Bank will cut interest rates next year in response to eurozone inflation dropping back to 2.4%. However, the rally has left the DAX's 14-day relative strength index, a momentum gauge, at 80.6, well above the overbought threshold of 70.

-Jamie Chisholm

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12-05-23 0819ET

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