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REP 708 - ASIC’s expectations for industry in responding to a market outage

sara.row
Community Manager

Overview

This article provides details on:

  • How the Iress platform supports our clients’ obligations outlined in REP 708
  • How clients can respond to ASIC with regards to maintaining their compliance obligations as market participants.

This information does not provide guidance outside of the expectations explicitly set out in REP 708. A market outage translates to material impact and uncertainty when dealing with at-risk orders and has been a point of enquiry by clients. 

ASIC REP 708 deals with the expectation for on-market participants to ensure the ability to submit 'new' orders to alternative trading venues, and not how at-risk orders are managed. At this time, there is no process or protocol for how open orders are to be managed by a market in the event of an outage (which may depend on the nature of the outage), and therefore this is intentionally not covered in this document. 

 

 

 

Expectations of market operators

 

E1: Develop automated systems and processes to proactively monitor for and identify market data issues and trading anomalies on its market in real time

 

Iress currently has data feeds and internal processes in place to support  ASX BN1/BN4 messages. Iress is supportive of market operators improving their protocol for market outage information services. We will support any changing data feeds and work with relevant participants to ensure that any changes to anomaly signals are in line with their needs.

 

E2: Refine procedures for session states during market outages, including clear thresholds for moving to a session state that accommodates participant interaction, and how and when this will be re-assessed on an outage day

 

Iress will work with market operators to align our procedures for service reinstatement and ensure that our system supports the proposed workflows. We will ensure that we have the required procedures and processes in place to disseminate critical information to market participants where required. We will also support them to modify orders as needed to allow trading to resume.

 

E3: Refine policies and processes for providing participants with trade confirmations and order status, including playbooks and alternative systems and data formats. Prioritize ensuring that this information is promptly available, accessible and accurate

 

In the event of a trading anomaly, Iress will incorporate any updated order and trade status data from market operators when they become available. Similar data is provided by other exchanges that Iress uses to reconcile orders at the exchange and make status changes to allow continued trading. 

 

E4: Review the communication protocol for market outages, including the scope of information and updates to be provided, and the delivery mechanism to other market operators, participants and other stakeholders

 

In addition to our response in E1, Iress will be improving the way we provide incident information to our clients. This includes live status page updates through our Client Portal. 

 

E5: Develop a protocol for intraday checkpoints during a market outage, including a final cut-off time after which the market would not be reopened. This should also consider whether purging some orders (i.e. good-for-day), or the entire order book, is appropriate

 

Iress will support market operators’ newly created intraday checkpoint protocols and ensure that our trading platform supports the market initiated events defined in this protocol. We will also provide clients with checkpoint information updates through our Client Portal.

 

E6: Document the circumstances under which particular order types or market components will be disabled, and the notice period before these changes are made

 

Iress’ IOS+ Limit Engine provides the capability to hard stop, or route orders to review, based on defined criteria (such as order types, execution instructions, and security types). Placeholder order type limits can be configured on the IOS+ Server, which can then be enabled by IOS+ Administrators if those order types are disabled for trading at the exchange. 

 

Contact your Iress account executive for more information or assistance to configure placeholder limits suitable for your specific order flow.

 

E7: Develop a comprehensive test strategy for major trading system changes, including conducting end-to-end, regression and simulation testing 

 

Iress will continue to align with relevant market operator testing and conformance processes. We will also modify our verification processes in line with any changes that are made accordingly. Iress will continue to support clients to meet their obligations by helping them to successfully navigate testing processes, where required.

 

E8: Facilitate testing of simulated market outage events during business continuity plan testing to enable participants to develop test cases to practice recovery strategies or switching to alternative arrangements for critical dependencies

 

Refer to E7.



Expectations of market participants

 

E9: Have arrangements in place to continue providing trading services and submitting new client orders to the alternative market. This may include through core electronic trading systems or third-party access arrangements

 

Iress allows participants to route new orders to alternative markets. This includes orders created by an operator and orders created via one of the automated routing features. While specific configuration changes are dependent on a participant's actual setup, we have outlined below a general overview of how to reconfigure Iress to route to alternative markets.

Provided the participant has a destination for the alternative market, the operator can manually create an order to that destination via the standard order entry.

Participants that use either the AUTODESK or Best Market Router (BMR) to route orders to markets automatically will need to apply some configuration changes to route orders to specific markets in the event of a market outage.

 

Clients can speak with their Iress account manager for assistance in understanding which configuration options would suit their specific operational procedures.

 

AUTODESK

The AUTODESK destination routes orders to the desired market via destination mapping configuration. The destination mapping configuration can be viewed and changed within the IOS+ Administration command.

Below is a screenshot of changing ASX listed securities routing from ASX destination to the Chi-X destination. A user will need to have administrative access in order to change these values.

This change takes effect immediately. All new AUTODESK orders created after the configuration change is saved will be sent to the newly configured destination.

 

sararow_0-1645777172879.png

 

 

Best Market Router (BMR)

To ensure that new orders are routed to the alternative market, Iress recommends that the problematic market is disabled from the BMR. This change takes effect without requiring a restart. 

BMR will direct new orders to the alternate market that is configured according to priority ranking.

Note, any orders that are still sitting at rest or queued to the market that is in an outage, will not be canceled. Please see the response to E12 for details on how to deal with these orders. 

Clients need to ensure that when the market is restored, the BMR configuration is updated to re-enable the market.

The linked document below is a client ‘How to guide’ that provides more detail, outlining the steps that need to be taken to reconfigure the Iress BMR.  


Combined AUTODESK and BMR

Clients that utilise both AUTODESK and BMR in their order flow have two options for allowing new client order flow to the alternative market. 

They can update the BMR configuration as per the above BMR section. Alternatively, they can configure an additional two single market BMR destinations. In the event of a market outage, they can update the destination mapping of AUTODESK to route the orders to the desired market specific BMR. 

In general, setting up the multiple single market BMR is generally the preferred solution but it is dependent on the participant’s exact setup. Please contact your account executive for further information should you need to discuss your specific setup.

 

E10: Map and remove any dependencies that electronic trading systems have on any single market or order type. Configuration changes must be tested and documented so they can be made swiftly and safely to continue trading during a market outage

 

Refer to E9

 

E11: Actively consider submitting new orders to alternative trading venues during a market outage. Review best execution policies and arrangements for trading during a market outage and facilitate trading on alternative trading venues, in accordance with client instructions

 

Refer to E9

 

E12: The client order priority obligations do not prevent participants from submitting new orders to an alternative trading venue, even if existing orders are unable to be matched or canceled on another market due to an outage

 

E9 describes changes to Iress’ systems configuration to submit new orders to an alternative trading venue. 

However, if client orders are already committed and resting on an inaccessible market and the orders cannot be canceled, re-routing those orders to an alternative trading venue may breach overfill checks. Iress provides a method to ‘move’ the original order to a holding account and fulfill the client order on an alternate trading venue.

The IOS+ feature to "Move Order and Cancel" At-Risk orders is available when the destination is offline. Move and cancel will inactivate the exchange order in the client account and move the record to an error account with the cancel request queued to submit to the exchange when the destination comes back online.

Using the "Move Order and Cancel" feature allows the IOS+ users to free up the committed volume to the client so that the order can be sent to an alternate trading venue. The "Move Order and Cancel" feature operates on single or multiple orders. Contact your Iress account executive if you would like to enable the "Move Order and Cancel" feature for your IOS+ destinations and set up the error account.

 

Standard care order flow

For standard care order flow with a DESK parent, the recommended procedure is:

  • For orders executed via BESTMKT, change the BESTMKT settings (see E9) to route new orders to the alternative venue.
  • Use the “Move Order and Cancel” feature to move the at-risk child order to the error account. This will set the child at-risk order (and BESTMKT order if applicable) to INACTIVE and free up the uncommitted volume on the DESK order.
  • Execute the uncommitted volume of the DESK order via an alternative trading venue destination.
  • When the market resumes, check the error account to see any executions that may have occurred prior to the exchange accepting the cancellation and deal with any erroneous trading as per your normal process.

 

DMA order flow

For DMA order flow where the client is creating the order to market directly, the recommended procedure is:

  • For orders executed via BESTMKT, change the BESTMKT settings (see E9) to route new orders to the alternative venue
  • Use the “Move Order and Cancel” feature to move the at-risk order to the error account. This will set the at-risk order (and BESTMKT order if applicable) to INACTIVE, and notify the client that the order has been canceled (either via FIX or IOS+).
  • The client can now resubmit their order.
    • Note: if the client is specifying the trading venue directly, the client may need to adjust their target destination before re-submitting the order.
  • When the market resumes, check the error account to see any executions that may have occurred prior to the exchange accepting the cancellation and deal with any erroneous trading as per your normal process.

 

AUTODESK order flow

For AUTODESK order flow where the client order automatically routes to market, the recommended procedure is:

  • Change the destination mapping settings (see E9) to route new orders to the alternative venue, or for orders executed via BESTMKT, change the BESTMKT settings (see E9) to route new orders to the alternative venue.
  • Use the “Move Order and Cancel” feature to move the at-risk child order to the error account. This will set the child at-risk order (and BESTMKT order if applicable) to INACTIVE, and free up the uncommitted volume on the AUTODESK order. You can then choose to either:
    • Manually create a new child order of the AUTODESK order to the alternative trading venue. The AUTODESK order may move into manual mode depending on your AUTODESK settings. Optionally move the AUTODESK order back into automatic mode for subsequent order actions; OR
    • Cancel the AUTODESK order and the retail client can then resubmit their order, which will now automatically route to the alternative trading venue.
  • When the market resumes, check the error account to see any executions that may have occurred prior to the exchange accepting the cancellation and deal with any erroneous trading as per your normal process.

For assistance in how to configure IOS+to support this functionality please contact your Iress account executive. Alternatively, please refer to the Iress IOS+ Help section ‘Managing Orders -> Cancel Orders in IOS+ -> Cancel an order for an offline destination’ for more details on using the “Move Order and Cancel” feature.

 

E13: Comprehensively consider extreme but plausible scenarios, including market outages, in business continuity plans and best execution policies. Proactively identify vulnerabilities for critical business services, consider alternative arrangements and incorporate learnings from previous market incidents. Increase awareness of market operators’ incident management protocols for market outages

 

Iress conducts regular BCP tests with participants upon request (opt in basis). These typically test outage scenarios for different components of Iress’ OMS system. In addition, Iress assists participants in market operator BCP testing by testing different outage scenarios for connectivity to the market using current production setup. Please contact your Iress account manager  if you would like to get specific information about your last Iress and/or market BCP or what BCP alternatives are available to you.

 

E14: Crossing system operators must decide whether their crossing system will continue operating, or be suspended or closed, and inform their clients. An outage notification must be submitted to ASIC if the crossing system is suspended or closed

 

NA - Iress does not supply crossing services. 

 

E15: Review arrangements for trade reporting where a market is unavailable or having issues with trade validation, including how trade rejections will be managed

 

If the destination for the primary market is offline, users can specify the destination for the alternate market when creating their trade report.

 

E16: Review trading arrangements with executing brokers for market outages, including available trade types and dependencies on particular markets. Increase awareness of market operators’ incident management protocols for market outages, and index providers’ procedures where relevant

 

Iress will engage with any relevant participants on how best to distribute participant-specific market outage information. Iress is not planning to add any automated distribution of participants’ status to connected buy-side clients

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