A TECHNICAL glitch brought share trading on the London Stock Exchange (LSE) to a halt for seven hours yesterday, wiping out most of the trading day on what should have been one of the busiest sessions of the year.

The meltdown could not have happened at a worse time for the LSE, which is battling a slew of new rivals that are offering ultra-fast trading systems and low fees. One competitor, Chi-X, was quick to pounce on the debacle, with Peter Randall, chief executive, likening it to the opening of Heathrow airport's Terminal 5.

The problem occurred on what could have been one of Londons busiest trading days of the year, as markets rebounded worldwide following the US governments decision to bail out mortgage companies Fannie Mae and Freddie Mac.

"We have the biggest takeover in the history of the known world . . . and then we can't trade. It's terrible," one trader said.

The outage happened just after 9am and trading did not resume until 4pm, by which time many traders had given up and gone home. A total of 1.3 billion shares changed hands across the London market yesterday - less than half of Friday's total and well below the daily average.

The LSE said the outage - the worst since early 2000 - was caused by a failure in the electronic connections that link the systems that receive and display orders to buy and sell shares and the market. The Johannesburg stock exchange, which also uses the LSE's trading platform, was also forced to halt trading.

"This halt today clearly has once again damaged [the LSE's] reputation as a leading exchange, especially on a day like today, highlighting that it may have been unable to handle the volumes this morning," added another trader.

The exchange would not say whether volume was the issue, and declined to give details on what had caused the problem. But angry customers were demanding an explanation.

"Problems have happened before, but never on a day like this when the market was coming to terms with the enormous Fannie Mae and Freddie Mac news from over the weekend," said Andy Stewart, chief executive of Cenkos Securities.

Before trading was suspended in London, the FTSE 100 had surged more than 3 per cent on the rescue of Fannie Mae and Freddie Mac. The index closed 205.6 points, or 3.9 per cent, higher at 5,446.3.

Shares in the LSE have fallen 60 per cent this year as concerns about competition have intensified. - ( Financial Times service, Reuters)