FIA EPTA members welcome the opportunity to respond to IOSCO’s consultation on market outages and are supportive of the work being done on this topic, particularly efforts to require trading venues to publish clear comprehensive outages plans on an ex-ante basis. Market resilience is at the core of efficient and competitive financial markets and it is imperative that trading venues clearly outline a well-planned approach to communication and management in the event of a market outage to provide certainty to market participants.
FIA EPTA members believe that trading venues should be required to observe the following issues when developing and implementing outages plans:
1. Clear, meaningful and frequent communication:
• A clear programme of regular and informative market communications by the venue;
• Periodic status updates published at least every 15 – 20 minutes;
• Notice of disruption to be provided as soon as possible upon occurrence of an outage;
• Consider creating a central venue status communications platform to provide a centralised tool to identify outages more quickly and to maintain continuity of trading.
2. Conclusive statement on order status prior to re-opening:
• Clarity on how orders will be managed prior to market resumption (a full order book purge being preferred);
• A venue should not re-open whilst order status is unknown;
• Not forcing venues to adhere to an arbitrary restart deadline.
3. Absolute prioritisation of a venue’s ability to operate the closing auction and print a closing price:
• Recognising specific status of the reference price set in the closing auction as being crucial to the proper functioning of financial markets;
• Listing markets to prioritise successful performance of the closing auction over other competing objectives;
• Venues should determine a consistent pre-determined procedure for calculation of alternative closing price;
• Ensuring the continued availability of a market wide reference price – e,g., via Consolidated Tape.
4. A consistent pre-determined methodology for an alternative closing price:
• Methodologies should be deterministic and be disclosed ex-ante in the trading venue’s outage playbook;
• A cascading model of alternative price determination may be considered, by reference to market conditions and accurate price signals;
• Listing markets should communicate conclusively and well in advance that such alternative methodology will be used in substitution for the closing auction.
5. Efficient and robust trading venue governance structures for the management of outages:
• Development and conduct by venues of detailed scenario planning and stress testing of potential outages and the trading venue’s response;
• Aim to ensure resilient outcomes that minimise the disruption to the price formation process in case of an outage;
• Trading venue infrastructure should have effective and immediate standby capabilities;
• It should be a key priority to prevent multi-market outages from occurring (e.g., where an exchange group operates multiple national markets in parallel);
• Venues should use a multi-node system architecture so that the trading platform can continue to operate even if components of the infrastructure fail or falter.
6. Post-mortems should be made public to all market participants:
• Meaningful post-mortems should be made public for review by all market participants so that they can properly understand the trading venue’s analysis regarding the root causes and remedial actions taken;
• Member firms should be enabled to provide appropriate feedback to the trading venue in order to improve outcomes going forward.
