In testing scheduled to begin this weekend, the securities industry will attack the year-2000 bug en masse.

More than 400 organizations representing 98% of the U.S. securities processing infrastructure will take part. They include major broker- dealers, custodians, stock exchanges, clearing and settlement utilities, vendors, and news providers.

Under the aegis of the Securities Industry Association, the test will simulate trading cycles, from order entry to settlement, as they would occur from just before New Year's Day to well into January, with between 500,000 to 750,000 validation points for all participants.

The objective is "to protect the United States investing public," said Arthur Thomas, senior vice president and director of global operations services at Merrill Lynch & Co. and chairman of the SIA's year-2000 steering committee, which announced the effort Monday. "We are simulating a real live cycle, and we're the only industry, to my knowledge, doing so."

Some 5,000 people will participate in the test over six weekends. March 6-7 will represent Dec. 29, 1999; by April 24-25 the participants will be at Jan. 22, 2000, which will be complicated by options expirations.

There are 850 test conditions covering nine major product groups: equities, options, corporate bonds, municipal bonds, unit investment trusts, mutual funds, money markets, government securities, and mortgage- backed securities.

Tests will be run on a combination of production and test systems and communication lines, instead of separate systems set up exclusively for year-2000 testing.

Scripts that define transaction conditions were tested in a dry run last July, which encompassed 10,000 trades a day among 28 firms.

"The results of the beta test verified that our testing methodology worked," Mr. Thomas said.

PriceWaterhouseCoopers has assigned a "coach" to work with each firm from initial registration to completion of the testing, said Marilyn Hignett, the consulting firm's New York-based director of solutions through technology. "War rooms" will be set up in each of the firms involved, and the SIA will run a centralized command center.

"We want to assess the results and fix anything that is not functioning," Mr. Thomas said. "We want to get openness and honesty out on the table." The euro conversion was a good learning experience for year- 2000, he added.

"The test will identify for each participant what went right and what went wrong," said SIA executive vice president Donald Kittell. "It will be an important diagnostic tool and will provide solid information about the readiness of the securities industry, individual firms, and market participants."

Overall results would be released on April 29 and shared with regulators. It is up to each firm to disclose the progress of its own program.

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