Francesca Bluck

IA publishes guidance on how to manage exchange outages

Throughout 2020 and 2021 there was a total of seven market outages across trading venues in Europe. One exchange outage in October 2020 lasted for three hours and effectively ceased trading in the region, and ultimately caused significant issues in closing the auction. Events like these demonstrate the market’s current inability to sustain trading when there is a market outage, operating instead on a “watch and wait basis”.

Currently, there is no standardised guidance for communication to market participants in the event of a market outage, despite the significant impact it can have on activity. That’s why today we have published a position paper that sets out our members’ recommendations on how regulators can support the wider industry to address market outages when they occur. We are now at a time of heightened cyber security risks globally, where the possibility of venue outages could become more apparent, and we consider it vital that regulators work to establish clear best practice in the event of market outages to ensure resilience is strengthened and disruption is kept to a minimum.

In the paper, we outline our recommendations for regulators, including ensuring that a standardised notice is issued during an outage which should set out how trading venues manage during these events and provide clear guidance on the immediate halting of market data. We would also like to see regulators seek feedback from venues, index providers and participants on the potential for an alternative mechanism to act as a closing auction when an outage occurs.

We are also extremely supportive of HM Treasury’s proposals for the UK authorities to work with the industry to implement a playbook for market participants and operators to follow in the event of future market outages. Following on from the FCA’s recent consultation on improving equities secondary markets, which proposes a number of key areas for industry guidance in order to manage further market outages, we hope that our position paper can offer further insight in to the requirements that need to be outlined within a market playbook in order to offer market resilience. We look forward to engaging with members and key market stakeholders to establish guidance that benefits the entire market.

Click here to read the full position paper.

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