The recent rash of “technical problems” hitting the world’s stock exchanges continues unabated. When Indonesia’s Stock Exchange (IDX) went to open yesterday morning, only 84 of the 114 listed security companies were able to connect to the exchange. As a result, the exchange decided to cancel its usual 15-minute pre-trading session and delay its opening for 30 minutes until 10:00 local time to diagnose and repair the problem which the Jakarta Globe reported was centered at the IDX’s main remote trading system.
The severity of the problem, however, led IDX to move trading to its revamped Disaster Recovery Center (DRC) which was built partly in response to previous reputation-tarnishing outages, but apparently that move did not totally solve the problem. The exchange did open at 10:00 as planned, but by 10:15, the connection problem reoccurred, and the exchange was shut down. Trading later resumed at 13:00, but the exchange then unexpectedly was shut down again 30 minutes early at 15:30. The premature closure was later blamed on the aftermath of the earlier technical problems as traders weren’t getting timely stock price information.
There were some doubts last night whether IDX would open as normal today, but it seems to be up and running without incident.
IDX trading volume ended yesterday down two-thirds of what would be a normal day. Trading volume was especially low given that the IDX had been closed for a portion of last week on account of the Eid al-Fitr Muslim holiday. While IDX apologized for the outage, it has not explained the exact cause of the “technical problems” other than to deny speculation that the problems were a result of it being hacked. Not unexpectedly, many traders were unhappy with the exchange's problems, but so were many investors; some are reportedly contemplating a class action lawsuit over the loss of trading time.
In other exchange-related news, last Friday Japanese regulators sanctioned officials of the Japanese Stock Exchange for an outage that occurred earlier this month. A defective router in its Tdex+ derivatives trading system was the cause, but the real anger was that for a second time this year, the backup systems didn’t kick in as expected (or promised). According to Bloomberg News, regulators said that the TSE did not check its systems thoroughly enough after the February outage. TSE’s CIO promised that this time it “will figure out a solution for the system trouble” and quickly.
Outside consultants are going to be brought in to examine the system, the Wall Street Journal reported. The consultants will “inspect all of [the TSE’s servers and network devices as well as its emergency backup systems.”
The regulators indicated that they will be keeping a close eye on TSE’s efforts, especially since it and the Osaka Securities Exchange are planning to merge in January 2013. TSE management said it will be again docking senior executive pay some 30 percent for one to two months in light of the latest incident.
Then last Wednesday, the Financial Times reported that NASDAQ and other exchanges were forced to cancel trades in Peet’s Coffee and Tea “after erroneous orders triggered a steep rise in its share price in a matter of seconds.” The share prices for Peet’s Coffee and Tea jumped 5 percent on “unusually high volume” within two minutes of the opening bell.
The FT further reported that, “Citing guidelines, NASDAQ said it could not name the firm or firms from where the trading error might have occurred,” so the culprit and the exact cause of the error will go unrevealed, at least for the moment.
Also on Wednesday, the Dow Jones Newswire reported that NASDAQ is preparing a report for the U.S. Security and Exchange Commission (SEC) because of a “software problem that may have caused violations of short-selling rules.” The Dow Jones story states that the software, which ensures the SEC short-selling rules are being followed, was inadvertently deactivated as other changes were being made to NASDAQ's systems. The situation apparently lasted a week before anyone noticed. The error is now causing financial firms and traders to review their trades during the deactivation period for violations of the SEC rules.
In addition, the Dow Jones story reported that the NASDAQ "market-data feed called ITCH (pdf) experienced service interruptions Tuesday and Wednesday, the exchange said in notes to customers. Minutes after Wednesday's issue, a backup version of the feed kicked in. Nasdaq on Wednesday also experienced an issue with technology meant to streamline automated trading.” Again, details on the causes of the problems are lacking.
All this is just more fodder for discussion at the SEC roundtable next month which it is holding “to discuss ways to promote stability in markets that rely on highly automated systems.”
Robert N. Charette is a Contributing Editor to IEEE Spectrum and an acknowledged international authority on information technology and systems risk management. A self-described “risk ecologist,” he is interested in the intersections of business, political, technological, and societal risks. Charette is an award-winning author of multiple books and numerous articles on the subjects of risk management, project and program management, innovation, and entrepreneurship. A Life Senior Member of the IEEE, Charette was a recipient of the IEEE Computer Society’s Golden Core Award in 2008.