Milan bourse downplays error, consumers upset (took 4 months to detect computer error)greenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread
Milan bourse head downplays error, consumers upset 08:57 a.m. Aug 01, 1999 Eastern
By Philip Pullella
ROME, Aug 1 (Reuters) - The president of the Milan bourse on Sunday played down an embarrassing error that caused miscalculations in several indices for four months but a consumer group threatened legal action against the exchange.
``No, I don't think there will be huge problems because we are talking about indices that were little-used,'' Stefano Preda was quoted as saying in La Stampa newspaper.
In a surprise statement on Friday night after markets closed, the bourse said a computer error by an external data supplier had caused miscalculations in several stock indices, including the all-share Mibtel index, between March 25 and July 30.
The mistake was highly embarrassing for an ambitious bourse eager to raise its profile and aiming to double its listings.
``This is stuff from another planet...,'' La Stampa said, asking how such errors could have gone on for so long.
Preda, the bourse president, told La Stampa nothing was done before to correct the error ``because it was discovered only recently.''
He added: ``Don't let me say more. The technicians are working on it.''
Camilla Pedraglio of the bourse's communications office said the mistakes stemmed from a a computer procedural error in which the shares were weighted wrongly, producing a distortion.
The weighting mistakes surfaced during checks of the technological processes used to calculate indices.
The bourse said the indices affected were the all-share Mibtel index, the Mib current general index, the Mib historic general index, Mib current and historic financials indices and the Mib current and historic diverse financials indices.
The all-share Mibtel, which wrongly appeared to end Friday 1.95 percent stronger at 23,189 points, had in fact finished up just 0.5 percent at 22,868, the stock exchange said -- a discrepancy of 1.4 percent or 321 points.
The magnitude of the distortions over the four-month period was generally around 300 points, a bourse source said.
Luckily, the Mib30 blue chip index was not affected by the error. Most major funds use it as the tool for their dealings. Fib30 stock index futures are based on the Mib30.
If the Mib30 had been affected, La Stampa said, it would have resulted in what the newspaper called ``a financial apocalypse.''
Still, consumer groups were up in arms and one of them, ADUSBEF, said it was considering legal action.
``We are looking into the affair and we reseve the right to file a complaint with prosecutors,'' said ADUSBEF president Elio Lannutti.
ADUSBEF said consumers may have been persuaded to invest in some funds by publicity material which may have used the wrong indices.
Another consumers group, ADUC, called for Preda and the bourse's managing director, Massimo Capuano, to resign. It said only the rolling of high-level heads could help the bourse recover credibility.
Milan stock weightings are based on market capitalisation.
Capuano said in early July that total market capitalisation was 500 billion euros ($530 billion), equivalent to 45 percent of Italy's GDP -- a low percentage compared with countries like Britain or the United States.
On a visit to London last month to raise the profile of the Milan exchange, Capuano said the bourse aimed to double its listings.
The Milan bourse source said the bourse had not yet decided whether to take action against the external supplier.
The stock exchange said recalculations of the indices could be found on its Web site in Italian at http:/www.borsaitalia.it/ita/market/seriesto.html and http:/infodata.sia.it/borsa/pagina-argoment/default-indici.html
An English-language version was available at http:/www.borsaitalia.it/ing/market/histser.html.
(Additional reporting by Abigail Levene)
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