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Traders furious as glitch halts bourse

THE Australian Securities Exchange was working last night to repair the damage to its reputation after its recently installed trading system, run by the US exchange operator Nasdaq OMX, suffered its second setback in less than a year, causing a four-hour shutdown yesterday.

THE Australian Securities Exchange was working last night to repair the damage to its reputation after its recently installed trading system, run by the US exchange operator Nasdaq OMX, suffered its second setback in less than a year, causing a four-hour shutdown yesterday.

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

Trading resumed at 2pm, kicking off with a surge prompted by the European debt deal that saw the ASX200 close up 105 points, or 2.5 per cent, at 4348.

Yesterday's embarrassing events follow a 90 minute shutdown in February. The new trading platform was switched on last November.

They also cast a cloud on the arrival of Elmer Funke Kupper as the new chief executive of ASX, who from Monday will face competition from its new trading 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, having already said they will trade on Chi-X.

"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.

ASX insisted the "system error" was not related to Chi-X's imminent arrival, nor 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".

Mr Funke Kupper told the market the 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 first-hand experience of the way our technical team resolves significant issues," he said.

The Australian Securities and Investments Commission was keeping in "close contact" with the ASX over the closure, a spokesman said.

"Our interest in these issues is always about ensuring market integrity is maintained so that investors can trade with confidence," the spokesman said. "While 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.

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." 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, at EL&C Baillieu.

Inside

The closure was nothing short of a shemozzle

Elizabeth Knight, Page 8


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