On 14 December 2023, the International Organization of Securities Commissions (IOSCO) issued a consultation report on market outages.
Market outages occur when a technical problem or an operational issue causes a disruption of trading output or the orderly trading of a trading venue, leading to the suspension of trading. Market outages can be highly disruptive.
The consultation report follows a survey that IOSCO produced which gathered information regarding recent market outages. The scope of the survey covered market outages in IOSCO member jurisdictions on equities listing trading venues between 2018 and 2022. The consultation report is based on the information relating to recent market outages collected as part of the survey. It aims to identify lessons learnt from the recent market outages and develop good practices for trading venues to improve market-wide resilience in the vent of an outage. Whilst the consultation report focuses on equities listing trading venues it may also have relevance to non-listing trading venues and venues where other financial instruments, such as derivatives, are traded.
To improve market-wide resilience in the event of outages, the consultation report proposes that listing trading venues consider adopting the following good practices:
- Establish and publish an outage plan with clearly defined roles and responsibilities. The outage plan may include, for example, the trading venue’s communication plan, reopening strategy, the arrangements for operating a closing auction and the methodology for providing the market with alternative closing prices.
- Implement a communication plan, which provides, through an appropriate communication channel, initial notice (as soon as possible) of the outage to market participants and the public and, thereafter, with regular updates on the status of the outage and the recovery pathway.
- Communicate information relevant to the reopening of trading in a timely and simultaneous manner to all market participants, providing clarity on the status of their orders and ensuring they receive an adequate period of notice before the resumption of trading. The outage plan may outline the processes and steps involved in the reopening strategy and, where relevant, the pre-opening phase. Such arrangements may interact with existing operational resilience measures, such as trading venues’ business continuity and disaster recovery plans.
- Ensure the processes and procedures that trading venues will follow to operate a closing auction and/or to establish alternative closing prices are published in the outage plan and communicated to all market participants during an outage. Where a closing auction cannot be run at the scheduled time, trading venues may consider various options, including postponing the auction. Trading venues may consider including in the outage plan a cut-off time by which trading venues would inform market participants whether a closing auction will be run. Market participants may likely need an adequate period of notice before the revised commencement of the closing auction. If it is not possible to operate a closing auction, trading venues may consider the use of a pre-defined methodology (as set out in their outage plan) to establish alternative closing prices for the day.
- Conduct and share with the relevant regulators a lessons-learnt exercise of the market outage and adopt a post-outage plan, with clearly defined timelines and allocation of responsibilities for remediation, designed to reduce the likelihood of future incidents and to improve the ability of the trading venue to effectively respond to outages. The lessons learnt exercise could include both a root cause analysis, with remediation actions for those root causes, and the evaluation of the handling of the outage.
The deadline for comments on the consultation report is 1 March 2024.