With 61 Seconds in a Minute, Markets Brace for TroubleBob Ivry and Yuji Nakamura
On June 30, time will stand still.
Just for a second -- a leap second.
Since 1967, when clocks went atomic, human timekeeping has been independent of the earth’s rotation. The problem is, the planet is slowing down and clocks are not. So every few years, to get everything back in sync, scientists add a second. They’ve done it 25 times since 1972. The last time was 2012, but that was on a weekend. June 30 will be the first leap second during trading hours since markets went electronic.
It’s scheduled for 8 p.m. in New York, just when markets in Asia are opening, and exchanges around the world are taking no chances. U.S. stock markets are ending some after-hours trading early and others from Sydney to Tokyo are recalibrating their clocks ahead of time. Trading firms also have to be prepared, said Greg Wood, president of the Futures Industry Association’s division that oversees market technology.
“The system is only as strong as its weakest link,” Wood said. “There are going to be issues.”
The wider world, too, has to be ready. In 2012, Qantas Airways Ltd. and Reddit Inc., among others, suffered glitches on their websites. As modern life has become more and more digital, the potential for snags when clocks go from 11:59:59 to 11:59:60, instead of straight to 12:00:00, has risen. The time warp has the potential of making mischief with law enforcement, voice and data services, utilities and weapons systems.
About 10 percent of large-scale computer networks will encounter hiccups due to the leap second, said Geoff Chester, public affairs officer for the U.S. Naval Observatory in Washington, which keeps time for the world’s biggest military.
“With the leap second, you count 61 seconds in a minute, and that’s where the problems lie,” Chester said.
Earthlings have to make sure NTP, or Network Time Protocol, used by computer systems, meshes with Coordinated Universal Time, or UTC, which is determined by the oscillations of cesium-133 in atomic clocks. UTC is currently one hour behind London time. There are, generally, three ways to do that, said Dave Sohn, senior product manager at Spectracom Corp., which helps companies integrate global positioning, navigation and timing.
1. Clocks can stop for a second.
2. Clocks can take a tick backward.
3. Clocks can slice up the leap second and spread it around in fractions. This is a practice known as dilution or, more colorfully, the “leap smear.” Google Inc. used the method during past leap seconds and Amazon.com Inc. said it’s planning to add time to all 86,400 seconds of the day before the event so at midnight its systems will be caught up.
Hundreds, if not thousands, of firms around the world now trade everything from stocks to junk bonds to interest-rate derivatives electronically. The fastest of them has the ability to react in millionths of a second.
To lessen any possible impact of the leap second, NYSE Arca Equities said evening trading will close five minutes early; Nasdaq will stop trading at 7:48 p.m. New York time and shut down at 7:55 p.m.; Intercontinental Exchange Inc. said it’s delaying all market transitions; CME Group Inc. said any data files submitted between five minutes before and after the leap second will be held for processing till five minutes after.
The extra second is coming amid a critical week for global investors, with Greece’s debt crisis worsening. June 30 is the day when the nation’s current bailout is set to expire and when a payment to the International Monetary Fund is due.
Futures exchanges in Australia, Singapore, South Korea and Japan will smear the leap second after the event, according to FIA. The Japanese stock exchange will smear the leap second over a period of two hours beforehand, so when the leap second comes just before the market opens, the exchange will be synchronized.
That means traders have to adjust their software for each exchange. There’s a lot at stake. Trading in Japan, South Korea and Australia starts exactly one second after the leap and about $3.7 billion will change hands at the bell on the countries’ stock markets, according to calculations by Bloomberg based on World Federation of Exchanges data.
“As systems continue to be more and more connected, it’s becoming harder and harder to predict just what the impact could be and how big,” said Hiroki Kawai, the head of trading systems at the Japan Exchange Group Inc.
In November, members of the International Telecommunication Union will meet like they do every three years and vote whether to retain the leap second.
If they get rid of it, time as measured by global positioning systems and Coordinated Universal Time will drift apart. That means that sometime a few million years from now, humans or their descendants will sleep till noon.
In the meantime, the Paris-based International Earth Rotation and Reference Systems Service will keep track of the gradual slowing of the planet, caused in part by drag created by the Moon. Millions of years ago days were 22 hours long.
“We need to stop having this fire drill every few years,” said Wood, who compared the leap second to Y2K, the anticipated computer catastrophes related to the calendar turning to 2000 from 1999, which were ultimately minor. At the very least, he said, “I’m in favor of it not occurring midweek.”
(A previous version of this story corrected the time of the leap second in third paragraph.)
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