ASX 4-hour glitch

ELMER Funke Kupper's tenure at the Australian Securities Exchange is off to a rocky start in the wake of yesterday's agonising four-hour closure that left investors unable to act on a long-awaited deal over the Europe debt crisis.

Local investors were also unable to celebrate a bumper profit result from National Australia Bank and strong sales figures from Woolworths - until trading resumed at 2pm, kicking off with a surge that saw the ASX200 close 2.5 per cent, or 105 points, higher, at 4348.

The ASX system error, which was detected about five minutes after trading started yesterday morning, prevented brokers and other market participants from interacting with the ASX's trading platform. The ASX said the market would reopen normally today, but it was still investigating what triggered the glitch.

After an hour-and-a-half shutdown in February, it was the second outage since the ASX's new trading system, run by Swiss exchange operator Nasdaq OMX, was switched on in November. ''We will work with our technology provider to resolve the issue,'' an ASX spokesman said. ''That will be ongoing to prevent a recurrence.''

Nasdaq OMX declined to comment yesterday.

The outage comes before Monday's launch of exchange rival Chi-X, which will offer discounted trading of ASX-listed stocks. It will be the first time the ASX has faced competition from another exchange - with several brokers, including Citigroup, Credit Suisse and Morgan Stanley, saying they will trade on Chi-X.

ASX insisted the ''system error'' was not related to

Chi-X's imminent arrival, or would it affect ASX's ability to clear and settle trades that took place on Chi-X.

But it highlighted the issue of ''having a single monopoly exchange operator'', said Gavin Parry, managing director of Parry International Trading, who said the shutdown was ''a highly embarrassing situation''.

The shutdown comes just three weeks into Mr Funke Kupper's stint at the ASX. He told the market late yesterday that ASX had not met ''the high standards that we set for ourselves and that our customers expect''.

''ASX has a strong reputation for the quality and reliability of its systems, and this incident gave me a firsthand experience of the way our technical team resolves significant issues,'' he said.

''As the new chief executive of the company, I am committed to the continued investment in our systems to ensure we deliver world-class products, latency and reliability.''

The Australian Securities and Investments Commission was keeping in close contact with the ASX over the shutdown, a spokesman said. The ASX will need to compile an incident report for the regulator.

''Our interest in these issues is always about ensuring market integrity is maintained so that investors can trade with confidence,'' the spokesman said. ''Whilst outages like this are unfortunate, they do occur on rare occasions.''

Some investors said Australia's reputation as a market operator would take a hit in the wake of the closure, with one Melbourne fund manager saying the event was ''not a good look for Australia''. ''Major overseas investors will be looking at us and saying, 'They can't even keep their stockmarket open.' ''

The outage also coincided with the final settlement day for October series exchange-traded options, leaving options traders furious. ''The market opened pretty much even, then it crashed, then it opened at 2 per cent,'' said option trader David Waterhouse. ''Lots of traders would have lost money with that 2 per cent margin.''

Another well-known options trader said the day had caused ''incredible damage''.

But others were more circumspect. ''It's very, very unfortunate, and who knows what consequences there might be, but you have to take a sanguine view on it,'' said Richard Morrow, director at E. L. & C. Baillieu Stockbroking.

Mr Morrow said that when the market opened it took off on the news out of Europe, but much of the activity was hedge funds covering short positions.

After marathon crisis talks in Brussels, leaders of 17 euro-zone nations yesterday unveiled a three-pronged plan to bolster the region's ailing financial system and avert recession.

Under the plan, private holders of Greek government debt will take a 50 per cent ''haircut'', easing some of the crippling debt burden on the Mediterranean nation.

The euro-zone bailout fund has been expanded from ?440 billion to ?1.4 trillion, allowing it to step in and prevent contagion spreading to larger economies if needed.

As well, European banks will be forced to raise an extra ?106 billion in capital as a buffer against any future sovereign defaults.

With BLOOMBERG and CLANCY YEATES