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Why did the ASX close?

Why did the ASX close?
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Global stock markets have rallied sharply over the last week after news of Joe Biden’s US election victory and encouraging results from potential Pfizer, and most recently Moderna Covid-19 vaccines. But stock traders in Australia who were hoping to capitalise on this market surge were left disappointed after a mysterious system glitch forced the Australian Securities Exchange (ASX) to close shortly after 10am on Monday 16 November.

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Here’s the lowdown on the ASX closure.

Why did the ASX close?

Initially, the ASX sent out a tweet telling traders that it was pausing trading because of  ‘market data issues’.

But later on, the exchange gave more specifics, stating that ‘a software issue limited to the trading of multiple securities in a single order (combination trading) created inaccurate data’.

The closure of the ASX occurred on the same day that its new equity trading system was due to go live. 

This is the first major outage for the ASX since 2016. Back then, the exchange experienced a major hardware failure that led to the outage of its equity market.

However, the ASX is not the only major exchange to shut down recently because of system issues. Japan’s stock exchanges, including the Nikkei 225 index, had to close on 1 October due to software problems.

The ASX expressed its disappointment over the outage. Managing director and CEO Dominic Stevens apologised for the disruption caused to investors, customers, and other market users. “The outage falls short of the high standards we set ourselves and the standards others expect of us”, the CEO said.

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The ASX is the world’s third largest pool of investable funds. It currently has assets worth US$1.7 trillion (£1.3 trillion) under its management.

When will the ASX reopen?

The ASX said that its equity market would remain closed for the remainder of Monday as it worked to investigate and resolve the issue.

It later confirmed that a solution had been found. Normal trading should resume at 10am AEDT on Tuesday 17 November.

What are the implications for the stock market and investors?

The long-term implications of the closing of the ASX remain to be seen. Still, the outage is likely to raise questions about market integrity on the part of the ASX.

Indeed, the Australian Securities and Investments Commission (ASIC) has said in a statement that the outage is of significant concern and that it will be watching to make sure that market integrity is not compromised.  

There has recently been an upsurge in stock market interest from new share market investors across the world who have opened a record number of trading accounts. This is according to the CMC Markets chief market strategist, Michael McCarthy.

Increased interest from new investors can only be good for the stock market in the long run. The main problem, however, is that this is putting pressure on global stock markets and their infrastructure. The ASX closure is perhaps a perfect example.

But as time goes on, I think exchanges like the ASX will have sufficient infrastructure to handle more trading volume. So there’s no need to worry.

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