Severed Phone Lines Halt Some N.Y. Trading : Telecommunications: Petroleum brokers at the New York Mercantile Exchange were unable to trade when gulf news sent London prices tumbling.

A severed AT&T; phone line crippled long-distance calls Friday in the New York area, halting trading at some financial markets and delaying hundreds of airline flights in the Northeast.

The accident evidently occurred as an AT&T; crew was yanking out an old cable next to the one that severed, the long-distance giant said.

Beginning at 9:30 a.m. EST, the majority of calls into and out of the metropolitan area were met with a recorded message saying all circuits were busy, said American Telephone & Telegraph Co. The problem also disrupted some overseas calls, the company said.

Spokeswoman Marilyn Reznick said 60% of the calls into and out of New York City still were blocked as of midafternoon. The remaining calls were rerouted, she said.

The problem was traced by the computers that run AT&T;’s phone network to an underground fiber-optic phone line in Newark, N.J., just west of New York City.

The break occurred as a crew above ground was pulling out an old cable that ran alongside the one that broke, Reznick said. She said it was believed that the cable, which carried more than 100,000 calls, broke at splices that had been put into it when the cable was installed.

Reznick said crews were removing the cable through a manhole in an attempt to find the cut. She said the company believed it could restore all service by evening by rerouting the calls to other lines.

On Jan. 15, 1990, AT&T; long-distance service was disrupted across the country for about nine hours. The outage, which reduced the company’s capacity by 50%, was blamed on a computer software flaw.

Friday’s problem disrupted the flow of information to Federal Aviation Administration facilities in the New York area, Washington and the Boston area, said FAA spokesman Duncan Pardue.

He said the problem affected hundreds of flights at airports from Washington to Boston, not just flights destined for New York.

From 9:30 a.m. to about 11:20 a.m., when the FAA’s phone lines were restored, many flights destined for the five New York-area airports were diverted elsewhere, and many flights scheduled to leave from the five airports were grounded.

He said the FAA is a priority customer of AT&T; and its lines were restored before those of other customers.

By midafternoon, the delays at New York’s airports had been reduced to 15 minutes or less, the FAA said.

The problem disrupted trading at several of the major financial markets based in New York.

The New York Mercantile Exchange, the world’s largest energy futures market, was closed at 10:28 a.m. because of the phone problems. Traders could not make long-distance phone calls, and the exchange was unable to transmit pricing information around the country, a spokeswoman said.

“We’re just kind of sitting around waiting for this thing to reopen. A lot of people are looking at it as a momentary relief,” said Brian Tagler, an oil broker with Shearson Lehman Bros. Inc.

The trading halt came just as some of the biggest news in the 5-month-old Persian Gulf standoff broke: face-to-face diplomacy between Iraq and the United States, which sent oil prices tumbling in the London market. But New York petroleum brokers couldn’t trade on the news.

The Mercantile Exchange said later it was resuming trading for at least one-half hour regardless of whether the AT&T; problem was corrected.

The Commodity Exchange Inc. suspended operations for about three hours because of the phone problem.

Trading also was affected at the American Stock Exchange, but to a lesser degree. Spokeswoman Shelly Wolfe said the problem only affected a few small stock brokerages that use AT&T;’s network to send trading information to the exchange floor. Larger firms use dedicated, leased phone lines.

The New York Stock Exchange itself was not experiencing problems, but some of its member brokerages were, said spokesman Richard Torrenzano.