* LSE faced delay decision before apparent sabotage -traders
* Clients say delay prudent
* LSE says customers were also not ready for upgrade
By Luke Jeffs
LONDON, Nov 4 (Reuters) - The London Stock Exchange was already poised to delay this month's crucial systems upgrade before it laid part of the blame for the decision on a suspected saboteur, according to some of its largest clients.
"They were going to delay the Sets migration anyway -- irrespective of what happened on Tuesday and the claims of suspicious circumstances," said a senior trader at one of the LSE's largest European investment bank clients.
The exchange's management had planned to decide on Tuesday whether to pursue or postpone the proposed Nov. 15 migration of its UK share order book Sets to a faster platform supplied by the LSE-owned software firm MillenniumIT, the trader said.
But this plan was scrapped when the LSE's European trading system Turquoise, which itself moved to Millennium technology last month, crashed for two hours on Tuesday morning. The police have now been notified.
The LSE said late on Tuesday it had launched a full investigation into "suspicious circumstances" around the latest disruption, adding that "in light of this incident" it had decided to "postpone its Main Market LSE technology migration".
"We are not saying we are moving the date solely because of what happened on Tuesday, there are network upgrades and customer readiness issues around the Sets migration to consider, too," said Alastair Fairbrother, a spokesman for the London Stock Exchange.
DELAY APPROVAL
The trader said the British exchange had made the right decision in postponing to next year the launch because his firm and other large LSE clients had not done sufficient testing.
The LSE's Turquoise trading platform switched to MillenniumIT technology on Oct. 4 in what was seen by the exchange as a dry run for the migration this month of the LSE's larger Sets business.
But the LSE's main investment bank clients began to question the timing of the Sets migration after Turquoise crashed for an hour and a quarter on Oct. 5, with the exchange citing a failed network card.
Some of the exchange's largest customers asked the LSE last month to postpone the date for the UK order book move in the hope the exchange would agree to allow them and the exchange itself more time for testing.
"The final decision might well have been that they were going to have to delay, but the Turquoise outage this week effectively made up their mind for them," said a senior trader at another large London-based investment bank.
The LSE wants to move Sets to the faster Millennium technology from its current Tradelect platform to attract more business from clients, including high-frequency trading firms.
The group hopes the migration will boost its UK market share, which, according to Thomson Reuters data, has fallen to 51 percent from 96 percent at the start of 2008 in the face of competition from tech-savvy rivals such as Chi-X Europe and Bats Europe. (Editing by Will Waterman)