Newspaper icon
The latest issue of Financial Standard now available as an e-newspaper
READ NOW

Technology

mFunds sparked ASX outage, $1m credit issued

The ASX said the outage from last month largely stemmed from the now-defunct mFunds and will subsequently credit participants $1 million to make amends.

While several circumstances led to the glitch, the ASX traced the root cause to the introduction of mFunds in 2014.

mFunds enabled investors to access unlisted managed funds via their broker using CHESS, and in batch settlement, each individual mFund with transactions settling on a given day generates an additional record within the CHESS "Users Global Section" page.

"When mFund was initially launched in 2014, ASX did not identify the need to make required changes to this specific piece of CHESS memory provisioning logic to accommodate a new mFund settlement user type. This left an error in the memory allocation logic in the "Users Global Section" page," the Incident Review report shows.

"Although this error remained in the system since 2014, other buffers and parameters within CHESS meant it did not impact system behaviour until specific circumstances in December 2024 caused the system logic to assign insufficient memory to handle the number of users in Batch Settlement for that day."

This in turn delayed trade settlements scheduled for December 18 and December 19.

ASX managing director and chief executive Helen Lofthouse explained the nature of this issue and how it arose was "highly irregular" and there is no record of previous incidents caused by this part of the system.

Lofthouse sent personal letters to customers apologising for the incident and promised a $1 million credit to participants affected.

"Not being able to complete batch settlement is unprecedented and we fully appreciate the seriousness of this matter. While the incident was successfully resolved such that the market could open normally on the next business day, this does not meet the high operating standards expected of ASX and which we expect of ourselves," she said.

On Saturday, 21 December 2024, ASX engineers investigated the root cause, working in parallel to validate the workaround process. Trades settled the following Monday without any issues.

ASIC said it is "deeply disappointed by the incident and the impact it had on the market" and that the ASX has "underlined its expectations for the ongoing resilience, reliability, integrity, and security of CHESS."

"All options are being considered for ASIC's regulatory response to the incident. ASIC is engaging with the RBA and stakeholders on the impact of the incident and lessons for the future," an ASIC spokesperson said.

Read more: ASXCHESSASICHelen Lofthouse