* Test is crucial to roll-out plan for main UK share trading
* Exchange is staking reputation on IT
By Luke Jeffs
LONDON, Oct 8 (Reuters) - The London Stock Exchange will this weekend test the technology that paralysed one of its markets on Tuesday to assess if the group can risk switching its main UK business to the system next month.
The British exchange wants to upgrade its UK equity order book Sets from its existing technology to a faster and more flexible alternative called Millennium on Nov. 1.
But this plan has been called into question after the LSE on Tuesday closed the exchange's European book Turquoise, which moved over to Millennium last weekend, citing technical issues.
Simon Maughan, an analyst at brokerage MFGlobal, said: "The LSE is behind the curve on technology. Rivals such as Chi-X and Bats have an advantage because they are smaller and more dynamic."
Chi-X Europe and Bats Europe are alternative trading platforms that have emerged in the past three years to challenge the LSE with faster and cheaper services based on what they claim is state-of-the-art technology.
Turquoise closed for an hour and a quarter at market opening on Tuesday, after that trading system switched to Millennium in what was flagged by the LSE as a dry run for the Nov. 1 migration of the Sets order book.
Clients have this week expressed concerns and warned the LSE it risks huge reputational damage if this week's Turquoise problem is repeated on the far-larger Sets next month.
The British exchange plans to test the software this weekend and will take a decision on the Nov. 1 deadline next week, according to sources close to the LSE.
The LSE declined comment.
The LSE started to fight back last October when it bought Sri Lanka-based MillenniumIT for $30 million and outlined an ambitious plan to move its main trading platforms onto the latter's more advanced technology. (Editing by David Holmes)