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ASX vows to do better while ASIC pushes for alternative trading options

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The regulator has put pressure on market operators and participants to meet its expectations on resilience.

In order to improve the resilience of the Australian equity market during outages, ASIC this week called on market operators and participants to continue implementing expectations it outlined last year.

These expectations, which include facilitating trading on alternative markets, were originally released in November last year after ASIC’s investigation into the ASX market outage of November 2020.

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“While progress has been reasonable given the industry is balancing other significant market system changes and volatile trading conditions, there is considerably more to do,” ASIC commissioner Danielle Press said on Tuesday.

In a separate consultation paper published by the ASX on Tuesday, the market operator said it is “working closely with our regulators, technology providers, independent experts, industry associations and customers to strengthen the resiliency and robustness of all the markets”. 

It underlined that in such “incident scenarios”, as occurred in 2020, the ASX always aims to restore its services and re-establish reliable and systematically available data at the earliest possible time. 

But the market operator stood by its decision to freeze trading, noting that when an issue of concern has been identified, it is “best practice” that “an immediate and comprehensive freeze” is implemented. 

“This freeze should and will impact the entire ASX market,” it said. 

It further added that sometimes a restoration “cannot be achieved on the same business day.”

The ASX did, however, vow to continue to invest in improving the reliability of its systems and processes with the intention of minimising both the frequency and the impact of any potential future incidents.

But the corporate regulator is adamant that market operators and participants must maintain compliance with their obligations under the law, including ensuring that they can continue to service clients during an outage. 

“There have been some delays for market participants due to uncertainty about how the market operators may respond, and the services they will provide during an outage,” Ms Press said. 

She added that ASX’s consultation paper (the first of three) on its proposed improvements should help to address some of this uncertainty. 

Among the proposed improvements, currently up for consultation, is a backstop time of 1.30pm, to permit up to 1 hour and 50 minutes of OPEN trading before the closing auction sequence begins at 4.00pm. 

ASIC also acknowledged that its market outage expectations coincided with other significant developments in the industry including ASX’s CHESS replacement, Cboe’s technology upgrade and new market integrity rules. But, it noted, that these “important competing priorities” are interrelated and should be implemented in a reasonable timeframe.

“By early to mid-2023, we anticipate that all market participants will have arrangements for at least new orders to trade on an alternative market during an outage, and that market operators will support this outcome,” said Ms Press.

Just last month, the ASX confirmed that the April 2023 go-live date for the CHESS replacement is no longer viable.

"This decision reflects the delay to the remaining delivery of application software, which no longer gives ASX and CHESS users the time allocated to complete their testing and other readiness activities before April 2023," Daniel Moran, group general counsel and company secretary, is quoted as saying in the statement.

The ASX said at the time that a new go-live date would be determined after further planning with ASX’s technology partner and input from stakeholders on the timing of project milestones, including industry testing, operational readiness, market dress rehearsals and implementation.

ASX vows to do better while ASIC pushes for alternative trading options

The regulator has put pressure on market operators and participants to meet its expectations on resilience.

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Jon Bragg

Jon Bragg

Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.

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