'High risk' issues left in ASX IT systems

The Australian Securities and Investment Commission (ASIC) has rebuked the Australian Stock Exchange for failing to address issues in trading system upgrades before pushing them live.

An annual assessment of ASX processes and documentation by the commission found the exchange had issues with the ASX Trade24 and ASX Trade systems after they went live in October and November last year respectively.

ASIC found nine incidents had occured at the ASX in the first six months of operation of Trade24 and ASX Trade.

"While ASX has nearly 25 years experience in upgrading electronic trading systems, and has historically maintained very high availability on its critical systems of over 99.8 percent, due to the number of incidents in such a relatively short time, we had some concerns about the robustness of the upgrades and the testing that was undertaken before the decision was made to go live," the commission noted in a report [pdf].

The two systems underwent the ASX's standard test regime and had also been tested by software vendor NASDAQ OMX.

Trade24 was provided in a test environment to select users for four months. The ASX Trade system - deemed less complex than Trade24 - underwent more testing, including a five-month testing environment, three industry-wide tests and sharing of programming code and test cases with NASDAQ OMX.

Tests produced issues considered low to high risks though none produced a 'show-stopper' issue - the ASX's most severe risk rating - prior to them being sent live.

Despite the range of testing, some issues remained on the ASX's risk register at the time of moving the systems into the production environment, according to ASIC's report.

Source: ASIC (Click for full view)

Though the commission was overall "satisfied" the exchange had met its statutory obligations as trading partner, five of ASIC's nine recommended changes - and agreed to by the ASX - were related to internal technological processes.

The changes included notifying ASIC of "innovative" technological changes, twice-yearly communiques around major releases and 90-day notifications for minor or mandatory changes.

"This may result in an arrangement of sharing with ASIC ASX Group's implementation plans, project timelines and key milestones, appropriate project sign-offs, details of relevant assurances obtained about the particular changes, and the nature of stakeholder engagement and attestation," ASIC suggested.

"In some cases, depending on the materiality of the change and its potential impact on the operation of the market and/or its users, we may seek independent third-party verification regarding the particular change."

The ASX had most recently agreed to beef up communication processes by running education sessions, maintaining a public register of changes and establishing an online forum for communication.

It would lock down code for technological changes ten days prior to release, allowing traders and partners to test potential compatibility issues.

The exchange also agreed to withhold any changes during the "change freeze" period between December 15 and January 15 each year.

ASIC targeted technology as a "fundamental driver" for trading systems and a key concern for future assessments.

"ASIC is right to highlight the importance of technology for our operations," ASX CEO Elmer Funke Kupper said.

"ASX will continue to invest in technology to ensure its customers have access to world-class products, services and systems."

The annual report did not factor in a recent outage on October 27, as it fell outside the assessment period.

That outage, blamed on a technical issue with software vendor NASDAQ OMX, led the exchange to delay migration to a new, $36 million data centre in Sydney's north until February next year.

The ASX also plans to launch a "low-latency order book" - dubbed PureMatch - at the end of this month, also based on NASDAQ OMX software.

It comes as an attempt to tailor trade execution facilities for individual market players, particularly in the face of potential competition from incoming rival exchange Chi-X.