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Stock Exchange Outage Shows ASX Is ‘Single Point of Failure’

  • Australian regulator releases report on Sept. 19 fault
  • ASIC calls on ASX to boost IT disaster recovery procedures

Australia’s securities regulator said it will conduct a wider review of risk management by the local stock exchange after concluding the nation’s equity markets are almost entirely dependent on ASX Ltd.’s systems.

A hardware failure on Sept. 19 in the ASX’s trading systems triggered a cascade of technical and operational issues that led to a delay in the opening of the market as well as an early closure. While a competing exchange, Chi-X Australia Pty, has been in operation since 2011, the report into the incident by the Australian Securities & Investments Commission notes that liquidity didn’t shift over on the day of the incident.

“The outage has shown that ASX’s trading systems are still a single point of failure for Australia’s equity markets,” the regulator said in the 48-page report released Wednesday.

The report concludes that while the ASX “broadly” adhered to existing incident management procedures, it needs to strengthen its business continuity and IT disaster recovery procedures. It also urges the exchange to review its communications procedures after a number of market participants said they didn’t get the “confidence and certainty they were seeking” from updates on the day.

“We shouldn’t need the ASX in order for the Australian market to be open,” Chi-X Australia Chief Executive Officer John Fildes said in a telephone interview. “Competition should’ve brought price reduction -- it has, innovation -- it has, resilience -- it has not.”


A timeline contained in the report details that the disk failure at the source of the outage occurred at 6:57 a.m. Market participants began noticing connection problems and contacting the ASX at 7:30 a.m. At 9:00 a.m, the ASX contacted the regulator to notify them of the failure.

“Well-functioning financial market infrastructure is critical to the integrity and reputation of the Australian equity market and the trust and confidence investors have in it,” ASIC Commissioner Cathie Armour said in a statement. “As the primary equities market in Australia, ASX has a critical role to play.”

ASIC said it will undertake a wider review in 2017 of ASX’s operational and technological risk management arrangements. The regulator also plans to consult on whether new integrity rules around the technological and operational performance of market operators are needed.

Dominic Stevens, ASX’s managing director and CEO, said the Sydney-based firm welcomed the review and will continue to cooperate with the regulator. It would provide a progress report by the end of March, he added.

“We have already made progress on a number of matters raised in the report, including enhancing our monitoring tools and procedures, and we are reviewing the management of session states and market communications,” he said in an e-mailed statement. “There are also important recommendations for the broader market that will need careful consideration.”

— With assistance by Vivek Shankar

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