FLASH FRIDAY is a weekly content series looking at the past, present and future of capital markets trading and technology. FLASH FRIDAY is sponsored by Instinet.
If the year 2020 had an inverse, it would be 2000.
2020 was entered into with every expectation that it would be a fine year, but it has been anything but. 2000 was approached with some measure of fear and apprehension, but it turned out fine.
Behind each year’s story is a bug — COVID-19 in 2020, Y2K in 2000.
The financial industry was seen as vulnerable to Y2K wreaking havoc on the formatting and storage of calendar data, with the doomsday scenario of computer systems being unable to distinguish between 2000 and 1900 and thus going haywire.
Regulators were on the case, according to a Traders Magazine article ahead of the millennium:
“The Securities and Exchange Commission is putting pressure on mutual funds and investment advisers, as well as public companies, to state clearly how they are tackling the Year 2000 computer problem.
At issue are mounting concerns that computers, not adequately programmed, will interpret the standard two-digit year code 00 as Jan. 1, 1900, instead of Jan. 1, 2000, a flaw that could ultimately hurt investors.
The Year 2000 problem is likely to preoccupy Washington as the new millennium draws near. For investors, the impact of massive Year 2000 computer glitches are almost too frightening to contemplate.
Sen Robert Bennett (R-Utah), chairman of the Senate Financial Services and Technology Subcommittee, held a series of hearings on the subject last year, and in November introduced the Computer Remediation and Shareholder Protection Act.
“The Year 2000 problem lies at the heart of our economy,” said Bennett. Investors, he added, deserve to know companies are responding to the Year 2000 challenge.
Bennett’s bill would mandate the SEC to amend its disclosure regulations and require companies to disclose a wealth of information about Year 2000 compliance. Specifically, they would have to provide a detailed description of their progress in Year 2000 remediation; a statement of likely litigation costs and liability outlays associated with the defense of possible lawsuits; disclosure of insurance coverage for computer failures and related lawsuits filed by investors; and a breakdown of contingency plans for computer failure.”
Lou Pastina, managing member at Global Markets Advisory Group, was running trading-floor technology at the New York Stock Exchange at the turn of the century.
“The preparations for Y2K at the NYSE in 1999 were extensive,” Pastina recalled to Traders Magazine. “Luckily the NYSE had Bill Bautz, a seasoned IT executive, to lead the effort and update the Board on progress. Upgrading the NYSE mainframes at the time was a huge effort because the Tandem mainframes were programmed in TAL (Tandem Application Language), and finding TAL programmers wasn’t easy. The NYSE had over 200 mainframes running its infrastructure. The entire effort from planning through QA was a huge success.”
Overall, the Y2K scare proved overblown, as while there were some instances of limited and temporary systems shutdowns, none of the apocalyptic predictions leading into 2000 came to pass. “World-Wide, The Y2K Bug Had Little Bite in the End,” The Wall Street Journal reported in a Jan. 3, 2000 headline.
In Pastina’s view, the capital markets business emerged unscathed partly due to proper preparation and work to address the problem beforehand, and partly due to just dumb luck, in that the Y2K bug wasn’t all it was cracked up to be.
And there was a silver lining. Said Pastina: “A huge side benefit of all that work was a cleanup of code and upgrade of infrastructure to modern standards, setting the stage for automated trading in the 2000s.”