ASX faces ASIC probe after technical glitch hits trading

ASIC is expected to launch a probe into an unprecedented outage at the ASX that forced suspension of trading yesterday.

Timeline of trading chaos

Securities watchdog ASIC is expected to launch a probe into an unprecedented ASX outage that saw a technical glitch bring down the stock exchange for most of the trading day, freezing out billions of dollars worth of transactions.

Newly appointed ASX Limited chief Dominic Stevens will take charge of an internal investigation into the technology failure that disabled the exchange operator twice in a single session.

Investors had just a two-and-a half window to trade stocks on the exchange, with brokers uncertain as to whether the market would open as normal this morning.

Mr Stevens, who assumed the top job at ASX on August 1, shot down talk of a potential hack.

“The issues were not in any way related to cyber security,” he said last night. “ASX is now focused on ensuring that the market reopens on schedule (this) morning.”

The Australian has learnt the bourse operator expects the market will open as normal this morning. Technical issues were believed to have been rectified after the initial 90-minute delay yesterday before problems resurfaced.

After just several hours of trading the benchmark S&P/ASX200 index ended down 1.9 points at 5294.8 points.

The glitch threatens to derail confidence in the local sharemarket at a crucial time, with traders’ eyes fixed on an update from the US Federal Reserve later this week.

While attention is firmly fixed on the exchange this morning, the focus will quickly shift to the reaction from the Australian Securities & Investments Commission when trading resumes.

“ASIC will definitely be interested in what’s going on because they’ve got oversight of the stock exchange itself,” said Michael Heffernan, a senior client adviser at broker Phillip Capital.

The last time a major glitch ­affected trade was in October 2011, when the ASX was frozen for four hours during morning and early afternoon trade, with the issue ­affecting trade from just after the open due to a system upgrade.

No punishment was handed out by ASIC at the time but the ASX agreed wto take steps to improve the operation of its markets, including upgrading technology.

The ASX is currently in the ­process of switching its technology provider to Swedish firm Cinnober Financial Technology for a new derivatives and equities platform.

Details on the exact nature of the latest technical issue were scarce as the ASX pointed to “a problem with a component that allows it to manage individual stocks”, with a “hardware failure” later tagged as the source.

The start of the trading day was pushed back from 10am in Sydney to 11.30am after the ASX became aware of an issue well before the planned open.

A glitch emerged later and the ASX was forced to cancel trades made within a 43-second window during market “pre-open” state at 11.10am and then suspend trade in those stocks until 1.20pm.

The entire market was shut for the day from 2.07pm.

In all, only $1.3 billion worth of trades were made, about a fifth of the action seen on the prior Monday.

However, the frustrations were tempered, largely due to expectations for a lacklustre session given a mixed offshore lead and with positioning for the Fed meeting yet to begin in earnest.

“It’s very unsettling when it does happen,” one broker said.

“But it’s only one day. The world’s not going to come crashing down because the market was closed by a glitch for one day, but if it extends much longer serious questions will be asked.”

Phillip Capital’s Mr Heffernan said the closure for the majority of a session “just shouldn’t happen”, even if the ASX had largely proved a reliable platform.

“To give the stock exchange its due, it happens very rarely. But rarely is still not good enough,” he said. “It’s not good for what’s supposed to be a continuous marketplace. There’s lots of money at stake in this sort of thing.”

The ASX’s Mr Stevens apologised for the abbreviated session. “What happened (today) does not meet the high standards of operations and system reliability that we set ourselves, and that our customers should rightly expect of us,” he said. “The primary issue arose from a hardware failure in the main database used by the system. This had a number of knock-on consequences that affected the operation of the market.”