(Adds details, comments from market participants, technical expert)
By Jennifer Kwan and Lynne Olver
TORONTO, Dec 17 (Reuters) - The Toronto Stock Exchange and the small-cap TSX Venture Exchange are expected to reopen on Thursday, after a system fault linked to data feeds shut both markets for the whole session on Wednesday, frustrating traders and sending business to other trading venues.
TMX Group X.TO, owner of the Toronto exchange and the junior Venture exchange, said it intends to reopen the two markets on Thursday morning.
There was no trading on either market on Wednesday -- the longest forced outage since the Toronto market closed its trading floor in April 1997 -- as technical glitches hit two data feeds.
TMX gave no exact reason for the outage, but said more information would be released when its investigation is done.
The market’s woes come as TMX Group tackles competition from newcomers such as Alpha Trading Systems, which was launched in November and trades a limited number of Canadian stocks.
One of those alternative trading systems, Pure Trading, benefited from the exchange’s troubles, according to data compiled by Bernardo Mariano of Equity Research Desk, a Connecticut-based advisory firm specializing in exchanges.
Pure Trading’s volume on Wednesday was 38.5 million shares, more than triple its five-day average, Mariano said.
The TSX traded an average of 519.5 million shares per day in November, with an average value of C$5.93 billion ($4.94 billion).
Some blue-chip Canadian stocks interlisted in the United States saw higher-than-normal trading volumes on U.S. markets on Wednesday.
TMX Deputy Chief Executive Luc Bertrand told BNN television that the problem “had nothing to do” with the company’s Quantum order-matching engine. Quantum is the exchange’s new and faster trading system, launched about a year ago.
The glitch also shut down trading of equity options on the Montreal Exchange, which specializes in derivatives.
“We will resume trading as quickly as we can,” Bertrand told BNN, adding: “We don’t like it either.”
TMX wanted to ensure that all participants were getting the same information, so it shut the market until full data service was established, Bertrand said.
The exchange’s troubles disappointed market participants.
When the TSX suffered some shorter outages in 2000 and 2001, “that was all buying related,” recalled Steve Ibel, an institutional equities trader at Beacon Securities in Halifax, Nova Scotia.
“They have to get these bugs fixed up...if you’re going to be the primary market, you have to instill confidence in your users,” Ibel said.
Brendan Caldwell, president of Caldwell Investment Management in Toronto, said that if he was head of a TSX-listed company, he would be “irritated,” especially when world news about oil cutbacks and higher gold prices likely would have moved Canadian resource stocks.
But Caldwell said Wednesday’s problems should not have a lasting effect on the exchange.
“It probably won’t be the most memorable thing that went wrong in 2008, so they’ll probably be able to get past it,” he said.
The London Stock Exchange LSE.L was hit with its worst system failure in eight years in September, which forced it to suspend trading for about seven hours, and Tokyo had some interruptions earlier this year, said Kevin McPartland, a senior analyst at research firm TABB Group in New York.
“This is becoming, unfortunately, a bit more common than it used to be and I think volatility is partially to blame,” McPartland said. “Volatility in a lot of cases has driven market data volumes up and up.”
But even if traders have alternatives for trading, the key issue is still where they will get the best execution, and most exchanges remain dominant institutions, McPartland said.
“Technology is obviously being used as a selling point for some of the new venues, but it still ultimately comes down to where is the liquidity, and where is the best price.”
The glitch is “generally an inconvenience to everybody out there that wants to trade stocks on the TSX,” but should have minimal impact on operations, said Jeff Fenwick, an analyst at Cormark Securities in Toronto who covers the exchange operator.
In 2000, at the height of the technology bubble, the TSX suffered an embarrassing series of glitches and shutdowns, and had to halt trading in Nortel NT.TO shares during two days in October of that year. ($1=$1.20 Canadian) (Reporting by Jennifer Kwan and Lynne Olver; editing by Peter Galloway)