British chancellor Mr Gordon Brown pressed the start button of a brave new world of order-driven trading in London's equity market yesterday. But he was most certainly not the most popular man in the City, nor were the "spindoctors" who contrived to worsen what was always going to be a difficult day.
A perceived shift in the timing of Britain's entry into economic and monetary union, to beyond the next general election, would in the normal run of things have put the market under intense pressure.
Coming on the day a new trading system was introduced, as well as the tenth anniversary of the 1987 crash, and following a near 5 per cent fall on the Hong Kong market, it looked like stretching the nerves of marketmakers, or RPTs (registered principal traders) as they are now known, to the limit.
But the system and the RPTs' nerves held up well under the strain, and the market saw an early hefty fall more than halved.
"If Mr Brown wanted to test the viability of the new dealing system then he certainly chose the right time; we had all the ingredients for a stock market nightmare," said one dealer.
The FTSE 100 index ended with a 60.1 point, or 1.1 per cent, loss at 5,211.0. Second-liners, which are still traded by the "quote-driven" or marketmaker system, were similarly unsettled, with the FTSE 250 index finally 41.9, or 0.8 per cent, off at 4,908.5. The FTSE SmallCap closed 8.2 down at 2,398.0. The All-Share index settled 25.6 down at 2,454.5.
"I, along with everyone else, would have settled for these sort of falls before the day began," said the head trader at one of the big European securities houses.
The market's prospects looked much bleaker at the outset. With Footsie not calculated until the first market trades in constituent stocks had taken place, its opening shot showed the index down 15.6 at 5,255.5.
But within five minutes, as bids and offers were loaded on to the order book, the index was down 40 points. Within 10 minutes it was 118 adrift.
At that point, the market suddenly rallied, halving the index fall. A firm opening by Wall Street, where the Dow Jones Industrial Average managed a 30 point gain in the late US morning, gave further encouragement to London, although Footsie later drifted back.
At 6 p.m., turnover in equities reached 494 million shares, with non-Footsie stocks, still traded via marketmakers, accounting for 55 per cent of business.
Mr Richard Jeffrey, chief economist at Charterhouse, the merchant bank, warned that "had it not been for the introduction of the new trading system the reaction to the EMU confusion might have been much greater".
Lehman Brothers, in a report on the shift to order-driven trading, said there is "some evidence from Big Bang reforms in the Swiss market last year and in France in 1986 that a wholesale move to automated order-driven trading has coincided with strong market performance following the reforms".
