ASX futures trading was down for four hours, making it the third tech meltdown since 2016

Dominic Stevens took over the top ASX job in August 2016. Picture: David Moir/Bloomberg

Every trading day is an important day, but Thursday morning was the worst possible time for the ASX futures to go down for four hours.

The session was shaping up as one of the biggest in recent months with the influential US Federal Reserve hiking the cash rate and outlining a road map for future hikes and every one trading interest rates needed to reset their expectations. Also earlier Thursday bets were being placed on the critical February jobs numbers released during the session which would add a twist to the timing of domestic interest rate moves.

This sparked a flurry of trading on interest rate futures and options. At the same time, the roller coaster of commodity markets had meant traders couldn’t jump on the agriculture and energy futures. And throw into this mix an expiring SPI March futures contract. This was more than a usual morning.

It came to a screeching halt at 9.43AM when the futures platform ASX24 was frozen due to a “hardware-related issue”. It went into a formal shutdown at 10AM and after several hours the market reopened at 2PM.

Futures trading was suspended for four hours. Picture: NCA NewsWire / James Gourley

It’s the case of three strikes for the ASX. This time the damage of the shutdown was contained to the most professional of markets: Futures trading. But it wasn’t lost on some traders that futures trading is all about risk management.

More than ever technology has haunted the tenure of ASX chief executive Dominic Stevens. He was hit with a crippling tech meltdown on the way into his job nearly six years ago, there have been damaging outages though it, and now, he is being hit on the way out. Stevens last month flagged his retirement from the stock market operator when replacement is found later this year.

Thursday’s four-hour outage stoked memories of a costly outage of equities trading in 2016 then more recently in November 2020 – in the middle of a bull market – a software glitch from ASX’s service provider Nasdaq that caused a daylong closure of the ASX and massive frustration among traders.

While an investigation is underway ASX’s early suggestion of a hardware problem is important. This means it is unlikely to be a cyber attack at a time when the world is worrying about heightened cyber risks out of the Russian-Ukraine conflict. At the same time software issues can be unpredictable and recurring.

In time Stevens can expect some questions from joint regulators the Australian Securities and Investments Commission and the Reserve Bank which will be trying to get to the bottom of the latest interruption.

Both will also be looking at fallout from the outage and whether it can be traced back to a failure to implement any of the nine recommendations made following an independent review of the November 2020 outage.

Among these were failure to minimise risks in delivering a software upgrade and making an assessment on the impact of traders before projects go live.

Tech glitches happen, but trading systems need to have redundancies, so outages when they happen should be rare and usually as a result of extreme external pressures.

The latest outage will be a hit to confidence and another dent in Australia’s reputation as a reliable market.

Dominic Stevens, chief executive officer of ASX. Photographer: Bloomberg

For its part ASIC said it views outages of this nature with “significant concern” given the critical role ASX plays in the nation’s economic infrastructure.

“Well-functioning financial market infrastructure is critical to the integrity and reputation of the Australian financial markets and the trust and confidence investors have in them,” ASIC said in a statement.

One bright spot appears to be better communication between the ASX and traders with estimates of when the market would re-open providing accurate.

Still, the ASX is entering a critical phase as it prepares to flick the on switch for its long promised $250m core CHESS trading platform replacement. Investors are entering a fraught territory as testing ramps up toward the April 2023 delivery date.

The new platform when in place will be cutting-edge, and will be based on the blockchain technology underpinning Bitcoin. Stevens said the upgrade puts ASX at the front in terms of technology with the exchange able to oversee trillions of dollars and manage millions of trades every day.

In outlining his planned retirement last month Stevens said it was important for a new chief executive to be in place as the ASX goes live with its CHESS replacement.

“This new phase for the company, which would take us to the back end of this

decade, would not be something I could commit to,” Stevens said at the time. This will enable ASX to hit the ground running as it enters its next strategic phase in 2023, under new leadership and with long-term commitment, he said.

Wilson’s win

Another round has gone to Geoff Wilson in the multi-year battle between the Sydney fund manager and Melbourne’s mercurial Nicholas Bolton.

Bolton tried to turn the tables on Wilson who has become an agitator in Bolton’s Keybridge Capital.

So while Wilson has a collective 26 per cent stake in the $17m Keybridge Cashbox, Bolton’s fund, of which he is managing director, in turn built a $5.6m stake in Wilson’s WAM Active Fund.

Fund manager Geoff Wilson. Picture: John Feder

The Bolton move was part of an attempt to make an off market takeover of WAM Active and the substantial holding was enough to call a special meeting and force his team of six Keybridge directors including himself on the WAM Active Board.

Even on paper the plan was always about irritation than success, chewing up costs for both sides, wasting investor time and focus of the Takeovers Panel. Heading into Thursday’s meeting WAM Active said it hadn’t received the basic nomination requirements to nominate the directors. While WAM Active held its meeting and made voting available online, Bolton’s Keybridge had attempted to request its own separate meeting in Melbourne which called for shareholders to attend in person. WAM Active sent three representatives to the Melbourne meeting which was chaired by WAM.

Nicholas Bolton. Picture: David Geraghty

This outnumbered the two Keybridge representatives and no other WAM Active shareholders turned up to the Melbourne venue. Meanwhile, none of the Keybridge six secured more than 13 per cent of the vote at the real online meeting, which meant none of the resolutions got up.

This won’t be the last we hear of a clash between Wilson and Bolton. For everyone’s sake at least they live in different cities.

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