In 2021, ASIC will review how market participants adapted to the ASX's outage in November, and if they and the ASX violated their market operating licences.
On November 16 at 10:24 am, ASX halted trading on ASX Trade after switching to new systems over the preceding weekend. The outage lasted for one day and was followed by problems with the ASX Centre Point, a dark-pool trade matching service.
ASIC yesterday evening flagged it will conduct a review in 2021 on how market participants have adapted their systems and processes in response to the outage and if any, broader market adjustments might be necessary to reduce the impact of any future incidents.
"ASIC will consider whether the failure by any market participants to already have in place arrangements to access an alternative venue is consistent with their obligations under the market integrity rules and their best-execution duty to their clients," it said in a statement.
ASIC said it has two primary concerns with the outage: why new orders received on November 16 after the outage were not directed to alternative venues such as Chi-X, and that some market participants did not have business continuity plans in place when ASX Centre Point went down but ASX's LIT order book and Chi-X remained available.
"The behaviour of market participants during this outage indicated too many firms are reliant on the ASX to trade listed securities. With a fully functioning alternative venue available, we are examining why far more trading did not occur on Chi-X on the day of the outage," ASIC commissioner Cathie Armour said.
"ASIC expects participants to review their arrangements for dealing with market outages and disruptions and make necessary adjustments to their order routing and execution algorithms to reduce their reliance on any one market operator or order book. Participants' duties to their clients, including the obligation to take reasonable steps to obtain best execution, do not fall away where there has been a market outage or disruption."
ASIC has also started investigating if the ASX met its obligations under its Australian Market Licence. This review is expected in first half of 2021.
It will look at whether the ASX has sufficient financial, technological and human resources to operate its markets.