CHIPS international banking test this weekendgreenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread
From the Associated Press wire (for educational/research purposes)
/cat:F/pri:R/sld:F/por:1/for:5/slu:BC-DJN--Y2K-MARKETTEST 1stLd-Writethru 9wsj- @TEXT BC-DJNY2K-Market Test, 1st Ld-Writethru, f0286,1022 Global markets tested for Y2K readiness Eds: RESTORES country to dateline and fixes spacing and style in byline. Via AP By PETER GOLDSTEIN Dow Jones News Service BRUSSELS, Belgiums (Dow Jones News) A global test this weekend of the financial markets' essential plumbing - clearance and settlement operations that juggle trillions of dollars in cash transactions each day - will show whether the system is ready for the millennium change. The test involves banks and other financial institutions in 19 countries that settle cash trades across 34 different systems. The New York Clearing House Association, manager of the Clearing House Interbank Payments system, or Chips, has organized the Year 2000 trial, and it expects initial results to trickle in by early Monday. Chips, a huge player in the cash settlement universe, handles about $1.2 trillion daily in dollar-denominated trades, or roughly 95 percent of total dollar payments worldwide. While the group has conducted successful Year 2000 trials within the U.S., this is the first attempt at a comprehensive cross-border simulation involving multiple currencies. The test will allow banks to see a fictitious trade work its way through one or more settlement systems to the desired counterparty, and then trace it back again to the originator for confirmation. Banks have "scripted" thousands of hypothetical transactions to show their trading customers they have no reason to worry after Jan. 1, 2000. The trial comes during a growing international effort to tackle the pervasive computer date glitch that could wreak havoc across the global financial markets. The Y2K bug refers to the inability of some computer software programs to recognize 2000 properly if the program reads dates on a two-digit basis. When "00" pops up on the software's date field, it might mistake this for 1900, for example. Financial industry groups like the Global 2000 Coordinating Committee and Custody2000 have spearheaded international trials that will take place throughout the remainder of this year. Central banks last year established the Joint Year 2000 Council at the Bank for International Settlements to coordinate their participation. The Council's chair is Roger Ferguson, governor at the U.S. Federal Reserve. Prospects For Weekend Tests Seen As Bright Broad financial sector tests already completed at national levels are encouraging so far. A closely-watched dry run sponsored by the U.S. Securities Industry Association this spring, involving 400 securities firms and nine securities markets, recorded Y2K-related errors in only 0.02 percent of 259,654 computer tasks conducted. SIA said errors were "identified and fixed quickly, with no disruptions to the testing schedule." Prospects for this weekend's cash settlement run also look bright, according to the Deutsche Bundesbank, which orchestrated a preliminary trial May 31-June 2 in Germany. "No Year 2000 problems were encountered" by banks or by payment systems, the Bundesbank reported. But testing also has highlighted the ubiquity of the millennium problem for market participants. In effect, they may be able to secure their own systems, but they have no way of checking every nook and cranny of an increasingly interlocked financial world to root out potential bugs. Thus, while testing continues, the new buzzword in Y2K circles is "contingency management" - drawing up scenarios and backup plans in case things go wrong. Even in the U.S. and the larger European countries, considered to be at the leading edge of Y2K planning, no one is willing to guarantee a smooth market ride through the New Year. That's because the financial system relies on so many other systems - electrical, transport, telecommunications, water - that also could fall victim to Y2K bugs. "The problem is that nobody really knows what will happen at the New Year. Anyone who says he knows must be an astrologer," said Victor Bruns, head of Deutsche Bank AG's Y2K Project Team in Frankfurt. "It could be a very quiet thing with just a couple of minor hiccups, or it could be serious in one particular sector, you really can't know." An in-depth report on the topic from the Bank of England in March highlighted the systemic intricacies of Y2K preparedness. Citing its own preparation experience, the BOE said it discovered an embedded computer chip susceptible to the millennium bug that could have paralyzed the Bank's standby generators. "The seriousness of this, had it gone unremedied, is clear," the central bank observed, since it would have blocked a switch to backup power in the event of an external grid failure. A blackout at a key central bank in the early days of 2000 is the kind of thing that might roil market confidence. It also isn't known how factors external to the markets might influence investor behavior, and perhaps put extreme pressure on trading systems early next year. If a nuclear power station in eastern Europe suffers a meltdown, for example, how would western European investors react? That isn't such an outlandish scenario. A European Union Commission report on Y2K presented to E.U. leaders at their summit in Cologne, Germany last week warned that nuclear safety in eastern Europe and the former Soviet republics "is of perhaps the most concern and should continue to be addressed without delay." In the meantime, those in charge of the markets' nuts and bolts have to focus on their own challenges. An official at the New York Clearing House said the weekend test really began Tuesday to allow sufficient lead time so that this Saturday and Sunday can represent settlement operations on Monday Jan 3 and Tuesday Jan 4, 2002. The latter date will be the first of the new year on which all cash settlement systems worldwide are open. Many still will be closed Jan 3, including national networks in the U.K. and Japan. The lead time reflects the fact that trades usually are settled with a lag of two or three market days after the transaction. AP-ES-06-09-99 1807EDT Pulled off the AP wire at work (publishing place). Don't know if it is online.
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