ASX consults on proposed changes to market management

On 24 November 2021, ASIC published Report 708 entitled ‘ASIC’s expectation for industry in responding to a market outage’. The report outlined the findings from ASIC’s review of the market outage and other operational incidents that affected the ASX equity market in the week of 16 November 2020 and set out expectations to support the resilience and robustness of the Australian equity market applicable to Market Operators, market participants and large institutional investors.

As part of its second round of consultations, ASX has been consulting on potential enhancements that would improve certainty about order and trade positions and a new session state, that in some incident scenarios, would allow ASX participants to cancel orders.

Order download service and trade download service

The proposed order download service and trade download service would be an automated service that provides ASX participants with a definitive list of orders in and trades executed in ASX Trade during a market outage or disruption. The service could be accessed and used systematically by ASX participants and would only be available in incident scenarios and not during normal operations.

The aim of the proposed service would be to provide sufficient information to assist stakeholders in incident scenarios – in particular, provide all the information required to support reconciliation and cancellation of orders – and be definitive as to the trades that have executed in ASX Trade.

‘Cancel Only’ session state

A ‘Cancel Only’ session state would only be utilised when a decision has been made that the Market will not be re-opening for the day and would provide an alternative to remaining in the ENQUIRE phase for the remainder of the day when it is not possible to move to ADJUST.

It would allow ASX participants to cancel orders during incidents and receive a systematic response to order cancellations. The session state could be used in conjunction with the proposed new order download service.

SIAA’s view

If the proposed order download service and trade download service enables participants to achieve certainty as to which orders reside on ASX, what orders have been executed and prevents the duplication of orders, SIAA is supportive of their implementation.

SIAA is also supportive of the proposed ‘Cancel Only’ session state as we consider it would support a better customer experience in a market outage and remove the risk of order duplication.

SIAA continues to point out however that while helpful, the availability of the proposed new services would not necessarily enable a seamless shift of orders to the alternative exchange. Participants would need to use the new trade and order data to make decisions in a very short period of time. They would still need to contact their clients and ask them if they want to move their trades. Clients may not want to move their orders for a variety of reasons and some of the challenges to moving liquidity are not technical.

And there will be costs involved in undertaking the development work required to adjust systems to make use of the new services and session state. The costs for these system adjustments will not be insubstantial.

What’s next

ASX is proposing to introduce the automated order download service, the automated trade download service, and a ‘Cancel Only’ session state and will move to the planning and development stage for this functionality.

SIAA will continue to engage with the consultation and provide member feedback.

SIAA’s submission on ASX’s second round of consultations can be found here.