ASX to take fresh heat over latest outage

The Australian Securities Exchange has restored its futures and options platform after a hardware fault knocked the system out.

The ASX is desperately working to get its futures and options market back online after a hardware fault knocked the system out. Picture: Gaye Gerard/NCA NewsWire

The nation’s corporate regulator has raised its “significant concern” about a major outage that halted trade on the ASX’s futures and options exchange for hours on a critical day for the market.

In the ASX’s second outage in 16 months, a fault knocked out the exchange known as AS24 from 10am until 2pm, bring the trading of futures to a standstill on a day that promised big moves after the US central bank hiked rates for the first time in three years and took a hawkish stance on inflation.

The system failure followed a major outage in late 2020 that halted equities trading for a full day, as well as a further outage in 2016.

It will pile pressure on the market operator to prove to regulators that its systems are up to scratch as it prepares for the rollout of its CHESS replacement system. The Australian Securities & Investments Commission was quick to express concern over the outage on Thursday afternoon.

“ASIC views outages of this nature with significant concern. It has had a significant impact on the market, including market participants and investors,” the regulator said in a statement.

“The ASX Group forms a critical part of Australia’s national 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.”

The outage was isolated to ASX24 and did not affect equities trading. But it did halt trade in interest rate, energy and equity futures, all markets that should have seen a bump in activity following the US Federal Reserve rate hike.

The timing was unfortunate, said Chris Weston, head of research at foreign exchange trader Pepperstone. “If you’re playing around in the rate space and want to tweak your exposure a day after the Fed move, this clearly couldn’t have come at a worse time,” he told The Australian.

“The Fed is clearly trying to step in front of a curve and is now far more hawkish, and that then flows into our market. If you’re trading rates and you need to mitigate a position today, this is an inconvenience for sure.”

The outage also hit shortly before labour force data showed Australia’s unemployment rate had dropped to 4 per cent, again leaving futures traders stranded during a market-moving event.

A “critical operational impact” notice at 10am AEDT was the first sign to the public that the exchange was not functioning as it should. This statement noted the ASX was urgently investigating an issue affecting systems, with trades executed after 9.43am under investigation due to the fault. A short time later, at 10.22am, the market operator said it was still investigating an infrastructure issue and was preparing to “restore the market to operating status”.

“Our futures and options market is in a halted state due to some technical difficulties. We’re working to resolve them as fast as we can,” an ASX spokesman said. The issue was later identified as a hardware fault, with the ASX confirming to The Australian it had not been the target of a hack.

Commenting at the time of the outage, Bell Commodities co-head of futures & FX Geoff Louw said there was nothing for his team to do during the outage but wait.

“It’s a very strange situation. We’re just biding our time, we can’t get access to the market,” he said.

The system came back online shortly after 2pm, with a notice by the ASX alongside an apology.

“ASX24 is now fully operational, all contracts are open and ASX is operating as normal,” the ASX told the market.

“ASX can confirm that the issue was caused by a hardware fault, which has been resolved ... ASX apologises for the disruption caused.”

The market operator just over a year ago suffered a crippling equities trading outage for more than a full day as it pushed ahead with a major upgrade of its system when it was not ready to go live. This was despite more than a year of testing, including four dress rehearsals.

That outage followed the upgrade of its eight-year-old trading platform with a new Nasdaq-based trading system, prompting the securities regulator to step in and sparking a series of reviews about the ASX’s governance and technological capabilities.

The result was additional licence conditions being imposed on the ASX.

IBM Australia, which the ASX, the RBA and ASIC appointed as an independent expert to undertake a review of the outage, found the market operator fell short on 17 of 75 benchmarked industry practices when assessing whether it was ready to go live with its market upgrade.

Speaking to investors last September, outgoing CEO Dominic Stevens said outages were “a fact of corporate life” as he pointed to the reduction in incidents in recent years as proof of the reliability of ASX’s technology.

This is the third major outage since Mr Stevens took on the top job at the market operator. In September 2016, a hardware failure in the main database used to operate the ASX market triggered a number of events that meant the it did not open until 11.30am and also closed early, just after 2pm.

At that time the faulty hardware was replaced and the ASX opened as usual the next day.

ASX Ltd’s shares closed down 1.7 per cent at $1.43.