HKEX completes review of derivatives market outage from Sep 2019
Hong Kong Exchanges and Clearing Limited (HKEX) today announces that it has completed the review of the derivatives market incident which occurred on September 5, 2019.
Let’s recall that, on September 5, 2019, from around 9:27 am onwards, a number of EP connections to HKATS were interrupted. The connection issues deteriorated gradually as the morning trading session progressed, and was subsequently identified to have been caused by an erroneous logic in a vendor-supplied Matching Engine (ME) partition that led to disconnections. HKEX suspended trading in the futures and options markets from 2:00pm for the afternoon trading session and the After-Hours trading session. After successful testing and verification of the interim solution recommended by the software vendor, trading resumed successfully in the derivatives market on September 6, 2019.
Today, HKEX says it has taken into account recommendations from the Securities and Futures Commission (SFC) and an independent consultant, as well as feedback from Exchange Participants and other key stakeholders, when implementing a range of enhancements measures.
The Exchange stresses that, since the incident, the derivatives market has operated without major issues. Working with the vendor, and following extensive testing and successful completion of a market practice session, HKEX has now deployed a permanent fix to the software that caused the malfunction.
In terms of enhancements, let’s note that HKEX has implemented a new tool to monitor the responsiveness of matching engines. The tool generates alerts if any matching engine fails to respond with an order processing completion message within a specific timeframe. The tool enables HKEX to detect the malfunctioning matching engine much quicker and significantly reduces the problem diagnosis time.
Also, the Exchange has deployed a health-check monitoring feature to confirm the continued healthiness of the trading system (HKATS). This check is performed daily, in preparation of the derivatives market opening. HKEX can also deploy this mechanism on an ad hoc basis during derivatives market trading hours to collect information to investigate and analyse whether a suspected issue relates to the network or other components of the software.
Following the incident, HKEX has reviewed its firm-wide policies and procedures on incident diagnosis and decision-making processes. The aim of this has been to enhance its incident handling processes and facilitate the assessment of whether a trading suspension is appropriate under various circumstances.
The updated HKEX incident management framework for incident managers, incident coordinators, and other staff who undertake incident management functions include key changes, such as a set of incident management policies and guidelines setting out the actions required to ensure readiness to effectively manage incidents, including incident investigation, classification and decision making.
In addition, the Exchange has outlined a list of criteria to facilitate comprehensive assessment of various scenarios, including incidents where the potential cause is unclear. This list helps expedite the incident escalation and assessment processes.
A newly launched centralised incident log provides further granularity and rigor around the incident handling process and greater visibility across relevant HKEX divisions. The Exchange has implemented incident templates, developed a centralised incident portal and rolled out a supporting training program in HKEX.
The Exchange says it will continue to work on several additional longer-term measures where appropriate.