Originally created 05/27/98

Dow 10,000 bug -- smoke or fire?



NEW YORK -- While the world struggles to avoid a year 2000 computer crash, a leading technology consultant is warning that some Wall Street computers could go berserk if the Dow Jones average crosses 10,000.

The Securities and Exchange Commission and others have dismissed the possibility of computer confusion if the Dow adds a fifth digit.

But the Gartner Group, a technology consulting firm, says some Wall Street computers have old software that could read a 10,000 Dow as 1,000 or 0000. Automatic trading systems could mistake the all-time high for a catastrophic crash and start selling, Gartner says.

The panic and confusion could snowball and expose investors to tremendous risks, says David Cappucio, a Gartner vice president. Gartner says it isn't trying to scare up business; it is just a research and consulting firm and doesn't fix computer systems.

"We have talked to a few clients in the top 10 to 15 (financial firms) in the world who have identified the problem and are working on it," Cappucio says. "We don't know how pervasive the problem is."

The problem is similar in nature to the year 2000 bug that the Federal Reserve estimates U.S. companies will spend $50 billion to prevent.

An informal review found that the 10,000 Dow issue won't be significant, SEC spokesman Duncan King says. The Securities Industry Association says brokerages are prepared, and the New York Stock Exchange says its computers won't be affected.

Merrill Lynch, the nation's biggest brokerage, says it is still looking at its systems but hasn't found any problems. PaineWebber Inc. refused to comment, other Wall Street firms did not return calls.

The test could come well before the new millennium. The Dow has been holding above 9,000 lately.

Doubters of the warning ask why should the Dow be any more a problem than Tokyo's Nikkei Stock Average or Berkshire Hathaway stock -- both are five-digit numbers. The Standard & Poor's 500 stock average rose above 1,000 with barely a notice.

Also, a 10,000 Dow test by the Chicago Board Options Exchange in early May went without a glitch, says the SEC's King.

The Associated Press, which supplies the Dow Jones industrial average to thousands of media outlets around the world, has tested its computer systems and found no problems generating a five-digit number.

Cappucio acknowledges that many firms may already be able to handle the Dow above 10,000, but he says some may not.

The NYSE software initially was unable to handle the extra digit when Berkshire stock first crossed the $10,000 mark in 1992.

Financial firms are already expected to pay $6 billion to prepare for the new millennium and are retooling computers to deal with a new European currency and eventually for trading in decimals.

Cappucio can't say how much it might cost to fix the Dow 10,000 problem. But Peter Harris, chief executive of ADPAC, a San Francisco firm that helps fix computer bugs, says the cost for an average company might be about $2 million.