The Toronto Stock Exchange expects to post a loss in 1998 because of a $47 million expenditure on its y2k repair. It may hit its members for money to offset the loss.
The size of the bill has shocked members.
This is one more example of a happy-face estimate turning sour.
Warning: spending money isn't the same as getting compliant. Lots of large U.S. firms are spending lots of money. None is compliant.
This is from Canada's GLOBE AND MAIL (April 14).
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The Toronto Stock Exchange says it will likely post a "sizable" operating loss this year preparing for the millennium bug and that it could hit the brokerage industry with a special assessment to replenish its capital.
The exchange says in a newsletter to member brokerage firms that it will spend $47-million this year to solve problems its computer trading systems will have marking the year 2000.
The magnitude of the expenditure -- far higher than brokerage officials were expecting and the biggest onetime cost for the TSE in recent memory -- has shocked the industry, said a brokerage executive who asked not to be named.
"It's a big number. I don't think people have seen this kind of number before."
What upsets the industry is that most of this expenditure would not be necessary if the exchange had introduced its new computer stock trading systems on time, said another brokerage executive, who also asked not to be named. . . . "Because they're slow and late . . . the members are going to pay 47 million bucks," the executive said. "I tell ya, I'm going to pass it right on to my customers." . . .
The TSE is owned by its 103 member brokerage firms. The loss will be a first in several years for the exchange, which has posted excess revenue over expenses every year since 1993.
The $47-million includes $20-million in capital spending and the balance in operating expenses for this year, says the newsletter, signed by TSE president Rowland Fleming and received by members yesterday. Mr. Fleming had mentioned the capital expenditure in a recent interview but not the $27-million in operating expenses.
The newsletter also says that in the "unlikely event" the exchange's working capital falls below a "reasonable comfort level" because of the spending on getting its systems ready to read Jan. 1, 2000, it may have to impose a special assessment on members. . . .
Because its financial resources are limited, the exchange said it will defer most other planned and new initiatives until after the millennium, including new technology for the Canadian Dealing Network and installing an automated system for trading derivatives.
"All other systems development work that is not essential has also been deferred, regardless of any business impact inconvenience," the newsletter says.