ASIC to widen investigation into ASX trade outage

Corporate watchdog ASIC will undertake a wider review of technological and operational risk management at the ASX following its "unprecedented" trading systems outage.

The outage on September 19 saw the equity market go offline for most of the day as a result of a hardware failure that prompted failover procedures, which were unable to properly connect to a back-up version of the ASX's trade database.

It was only the fourth time in the past decade that the ASX had been forced to close operations due to a technical issue.

ASIC's initial report into the outage, released today [pdf], found that the ASX had broadly adhered to its existing procedures for incident management in responding to the outage.

It did, however, make a handful of recommendations for how the ASX could improve the resilience and robustness of the wider market, including through better monitoring tools like system alerts.

"There were a number of event triggers that could have been detected earlier with more effective monitoring tools," ASIC said.

"For example, it was not immediately apparent to ASX that a number of application processes were in a hung state, creating an inconsistent configuration for ASX Trade."

ASIC also recommended the ASX strengthen its business continuity and IT disaster recovery, and enhance its enterprise architecture documentation to better describe 'current' and 'target' states, among other suggestions.

The ASX has already replaced the hardware components that triggered the failure, introduced a number of new monitoring tools and processes, and is reviewing its business continuity planning testing practices, the exchange told ASIC.

"ASX’s focus is now on longer-term, forward-looking actions, including review of operational risk management controls, BCP, testing arrangements and further work with its technology service providers and hardware vendors," ASIC said.

Digging deeper

ASIC also said the outage had highlighted the pivotal nature of the ASX trading system to Australia's equities markets, prompting it to conduct a wider review of the ASX's technological and operational risk management arrangements next year.

It said it would decide later whether to do so itself or through an independent party.

"Our reviews of ASX’s performance have typically been event-driven, focusing on the historically rare incidents where ASX’s performance has fallen below market expectations," ASIC said in its report.

"A wider review will reflect the growing pace, complexity and dynamism of the Australian market, as well as the important role of market infrastructure in its integrity and reputation."