By Amanda Cooper and Harry Robertson
LONDON (Reuters) -The London Stock Exchange (LSE) said it is preparing to resume normal trading on Friday after an incident disrupted activity earlier on Thursday.
The incident forced the exchange to halt trading in smaller stocks, although blue-chip shares suffered no interruptions.
LSEG did not offer any details on the incident in its statement and said it had no further comment when contacted earlier by Reuters.
LSEG data showed trading halts had affected smaller shares such as food delivery app Deliveroo and online fashion retailer ASOS (LON:ASOS), among others.
FTSE 100, FTSE 250 and International Order Book securities - those shares listed in London by overseas companies - were operating normally, the exchange said regarding the incident.
This was the first time trading on the LSE had been interrupted since 2019.
The FTSE 100 closed down 1.2% on the day.
"(The incident) will catch the attention of investors, people will want to have a quick answer to what was going on in order to maintain confidence," Fiona Cincotta, senior markets analyst at City Index, said.
"The quicker we can get some news on what caused the incident, the quicker the market will be able to move on," she said. "We may see a little bit of volatility at the open tomorrow."
In 2019, the London Stock Exchange suffered an almost two-hour outage that hit FTSE 100 and midcap stocks, which LSEG said was caused by a “technical software issue”.
Thursday's incident happened on a busy day in the corporate earnings season. LSEG's own shares, which are listed on the FTSE 100, traded regularly, and closed up 1.88% following the release of its results earlier in the day.
"For a stock exchange, you have one job and that’s to keep your market going. And when these outages do occur, it doesn’t inspire a lot of confidence," David Morrison, a market strategist at retail broker Trade Nation, said.
"They haven't given a reason for why this outage occurred ... it's going to take them time to sort out what it was before they can answer," he said.
The Financial Conduct Authority, the UK markets regulator, did not immediately respond to a request for comment about the outage when contacted by Reuters.
Outages can affect any exchange, regardless of size.
The New York Stock Exchange in January suffered an outage that prevented the opening auctions for a slew of stocks, prompting widespread trading halts, confusion over whether orders were being filled at correct prices, and trades in more than 250 securities being busted.
Britain's departure from the European Union has seen Amsterdam overtake London to become Europe's biggest share trading centre and London's IPO market has also suffered as the EU become a new rival in international listings and as competition from New York for IPOs remains intense.
Thursday's trading halt could knock appetite for UK stocks, according to Ben Laidler, global markets strategist at trading platform eToro, a company popular with retail traders.
"It’s tough to beat the London Stock Exchange with a particular stick on this, but it does just add to this unfortunate narrative out there which is that UK markets are just not the place to be," he said.
Britain's financial watchdog signalled on Monday that its plans to merge the London Stock Exchange's two categories of company listings and dilute some shareholder rights were poised to go ahead in a bid to make the City of London more globally competitive.
Thomson Reuters, which owns Reuters News, has been a shareholder in LSEG since 2021. LSEG also pays Reuters for news stories.