Trading on the ASX returned to normal after Monday’s problems which saw the best part of $4 billion in trading volume/value not happen because of a still to be disclosed technical problems.
Was it a one off (there was an outage a few years ago), or problems with a widely used market trading system technology and software? The ASX says trading is back to normal, but Treasurer Scott Morrison says ASIC will be inquiring into the stoppage.
The ASX has refused to say so far to address is whether it drew on the disaster recovery site at Bondi Junction, in Sydney, the exchange’s the backup for when there is a loss of connectivity at the primary site.
ASIC said yesterday “We will examine the cause and any effects of yesterday as a priority and as part of our close oversight of market operators. We are concerned any time there is an incident like this on any of our securities markets, as of course are the users of those markets.
The ASX trading platform is called ASX Trade. "ASX Trade is a NASDAQ OMX ultra-low latency trading platform based on NASDAQ OMX’s Genium INET system, which is used by many exchanges around the world. It is one of the fastest and most functional multi-asset trading platforms in the world, delivering latency down to ~250 microseconds,” according to the ASX.
But it is not the first problem involving exchanges using the Nasdaq OMX trading system. Singapore Exchange suffered an outage in July says its trading platform, “is based on GENIUM, a trading platform developed by NASDAQ OMX.”
So shared problems? Remember the Singapore Exchange (with the enthusiastic support of the ASX and many in the top end of the Australian broking and finance industries), tried to buy the ASX in 2011, but the deal was knocked on the head by Wayne Swan, then Federal Treasurer.
But had the merger happened, the Australian and Singapore markets could have been knocked out together on several occasions since 2011 (and especially in July of this year and yesterday).
A press release issued in October, 2010 to announce the proposed deal said in part, as one of the positives from the takeover/merger:
“(L)eading exchange technology, including the proposed introduction of the world’s fastest trading platform with the lowest trading latency, and flexible data and connectivity solutions.”
Note that the release talked about a “trading platform” not trading platforms, indicating the idea was for one platform across both exchanges, which would have made for a day of embarrassment on July 14 on the SGX (and two in 2015) and a repeat yesterday with the problems on the ASX.
It’s no wonder regulators, led by the RBA, APRA, Federal Treasury and ASIC were concerned about the merger (and the cross border nature of it) and opposed it.
But the disruption and its costly outcome for investors of all sizes, brokers, banks and others, is another in what is becoming a trail of problems across the world in the past few years for those exchanges using trading systems developed and delivered by Nasdaq OMX.
These have included the Singapore Exchange which failed to trade for a day on July 14 of this year – two interruptions in Singapore in 2015 One was due to a power failure), and a three hour outage on Nasdaq itself in 2013.
That one was the most embarrassing and was caused by a software bg which impacted connections to the New York Stock Exchange’s trading system. But Nasdaq’s back up system didn’t work, which was the greater sin.
Back in 2008, two outages on the OMX Nordic Exchange caused market regulators in Sweden and Norway some angst. On the ASX in February 2014, trading was stopped for half an hour because information for some shares was not being displayed properly. And there was a four hour outage in 2011 on the afternoon of October 27.
And in 2012, a fault on Nasdaq OMX itself hit the IPO of Facebook, halting trading in the shares for 20 minutes. According to the Financial Times: “Trading firms were disconnected from the exchange during the auction process, resulting in quotes being cancelled and confusion over whether orders were to buy or sell. The exchange was fined $10m by US regulators.”
So the question is not whether the Council of Regulators here (The RBA, APRA, Federal Treasury and ASIC) take a hard look at what happened yesterday. ASIC is doing that, as it said yesterday.
The ASX is promising more information/explanation/solutions next week to a meeting of market participants. You’d be hoping the regulators will want to be told first what went wrong and what will be done to correct the situation.
