On Tuesday, June 30, an additional “leap second” was added to realign Coordinated Universal Time (UTC) with mean solar time. The FIA Market Technology Division provided guidance and coordination to help market participants prepare for this event and minimize the potential for disruption to trading systems and operations. As part of this effort, the division collected information on how exchanges around the world accommodated this extra second and shared information to assist firms in preparing for the event. On May 14 the division hosted a webinar to discuss its findings and on June 22 the division published a set of recommendations for firms to use as they prepared for the leap second event.
Introduction
A leap second1 is the addition of an extra second at the end of a day to realign the Coordinated Universal Time (UTC) standard with mean solar time. UTC - based on International Atomic Time (TAI) - is the accepted standard for international time synchronization, taking the place of Greenwich Mean Time in 1960.
On Tuesday, June 30, an additional “leap second” was to realign Coordinated Universal Time (UTC) with mean solar time. The majority of computer systems are synchronized using Network Time Protocol (NTP), which encodes time using the UTC system and is used to avoid clock drift between different systems. Such systems form the basis of electronic trading and clearing operations across the globe.
This was the first time that a leap second event occurred during active trading hours in an environment where electronic and automated trading relies on sub-second precision for communication, execution, clearing, surveillance and audit trails.
Why is it important?
On Tuesday June 30, 2015, an additional second was added to the UTC day to account for variability of the earth’s rotation. Theoretically, clocks changed from 23:59:58 UTC to 23:59:59 UTC to 23:59:60 UTC to 00:00:00 UTC.
For reference, 23:59:59 UTC is equivalent to the following times around the globe:
| New York | 19:59:59 | (EDT, UTC - 4 hours) |
| Chicago | 18:59:59 | (CDT, UTC - 5 hours) |
| London | 00:59:59 | (BST, UTC + 1 hour) |
| Frankfurt | 01:59:59 | (CEST, UTC + 2 hours) |
| Singapore | 07:59:59 | (SGT, UTC + 8 hours) |
| Tokyo | 08:59:59 | (JST, UTC + 9 hours) |
| Sydney | 09:59:59 | (AEST, UTC + 10 hours) |
This coincided with several global financial markets opening for trading or already in the process of trading, including Asia-Pacific equity and futures markets in Japan, Korea, Singapore and Australia, as well as overnight U.S. futures markets and late trading on some U.S. equity markets.
During the 2012 leap second event several systems – including airline systems and internet servers – encountered issues based on differences in preparedness and implementation, mainly because most computer systems are not prepared to handle a timestamp of 23:59:60 and there are different approaches to time synchronization protocols that adjust systems to avoid using a timestamp of 23:59:60.
Leading up to the 2015 leap second event, there was concern within the financial industry that similar issues could lead to a disruption to trading operations across exchanges, clearinghouses, brokers, investors and key service providers. The Commodity Futures Trading Commission asked U.S. futures exchanges to provide details on how they planned to approach the leap second event. Some exchanges published plans to delay the opening of trading. Several exchanges in Asia have also announced details regarding how their systems will adjust their clocks before or after the leap second, and will retain normal trading hours.
How did we respond?
The FIA Market Technology Division organized a committee with members from across the industry (including coordination with the CFTC and other industry bodies such as SIFMA) to provide guidance and coordination across financial institutions to help prepare for the leap second event, and inform the decision-making process around business continuity and/or any operational impact. The committee addressed the issue by collecting information, assessing impact and promoting readiness for the June 30, 2015 leap second event.
As part of our effort to educate market participants, the FIA Market Technology Division hosted a webinar on Thursday May 14, 2015 to discuss our findings.
On June 22 the division published a set of recommendations to help the industry prepare and reduce the likelihood of market disruption. The recommendations focus on encouraging each firm to understand its environment and review key areas in order to anticipate the impact of the leap second. The recommendations cover five areas:
- Develop and Implement a Continuity and Recovery Plan
- Implement Enterprise Time Management
- Update Vulnerable Systems
- Actively Monitor Critical Systems
- Consider Adjusting Market Activity
The recommendations also include four appendices:
- Appendix A: a matrix with information on specific exchanges and their approaches to handling the leap second event
- Appendix B: an overview of Network Time Protocol and Precision Time Protocol
- Appendix C: a description of two approaches to leap second dilution
- Appendix D: links for leap second information published by hardware and software providers
References:
Managing Leap Seconds with NTP
2012 Issues with the Leap Second
Resolving Leap Second Issues in Red Hat Linux
FIA is the leading trade organization for the futures, options and cleared swaps markets worldwide. FIA’s membership includes clearing firms, exchanges, clearinghouses and trading firms from more than 25 countries as well as technology vendors, lawyers and other professionals serving the industry. FIA’s mission is to support open, transparent and competitive markets, protect and enhance the integrity of the financial system, and promote high standards of professional conduct. As the principal members of derivatives clearinghouses worldwide, FIA’s member firms play a critical role in the reduction of systemic risk in the global financial markets. FIA and its affiliates FIA Europe and FIA Asia make up the global alliance FIA Global, which seeks to address the common issues facing their collective memberships.
FIA Market Technology Division fosters the exchange of knowledge and experience and provides a forum for discussion to benefit division members and other futures industry technology personnel. The division also studies and advocates means by which technological solutions can be used to enhance efficiency in member operations. Members may participate in various committees including: Automated Trading, Business Continuity Management, ETD/ OTC Evolution, Events & Communications, Financial Regulation/ Operations & Risk Management, and Technology Standards & Sound Practices committees.
[1] Introducing a leap second periodically corrects for irregularities in the Earth’s rate of rotation. This concept was originally introduced in 1972. The decision to introduce a leap second is taken by the International Earth Rotation and Reference Systems Service (IERS), formally the Bureau International de l’Heure. Leap seconds are only introduced on either June 30 or December 31. The last occurrence of a leap second was on Saturday June 30, 2012.
