A fault in the system of Swedish software company, OM Gruppen, was to blame for a temporary failure of the Hong Kong Exchanges and Clearings’ (HKEx) futures and options trading system last Thursday, the exchange has revealed.A joint investigation by the HKEx and OM – the supplier and maintenance vendor of the Hong Kong Futures Automated Trading Systems (HKATS) – identified a bug in OM’s software when handling certain complex combinations of combo orders. This led to an infinite loop in the transaction process, thereby disabling the HKATS.
Trading in the Hang Seng Index (HSI) futures and options, mini-HSI futures and options, MSCI China Free Index futures and Dow Jones Industrial Average futures contracts was brought to a standstill with less than five minutes to go before market close on January 30. Trading in the Hibor futures, three-year, exchange fund notes futures and international stock futures and options contracts was able to resume after a nine-minute halt.
But with traders rapidly losing patience after the second breakdown in the HKEx’s trading system in under a year, market participants believe the problem is also rooted in the system's inability to support large volumes. “Every time we have a busy day the system crashes,” said Dun Lee, head of equity derivatives at Fimat, the retail brokerage arm of Société Générale in Hong Kong. “The market trades 20,000 [front-month futures] contracts a day and it still can’t handle the capacity. That’s why we’re not showing that much liquidity, because people just cannot trust the system.”
Although the exchange has unveiled an interim solution that restricts trading of certain predefined futures calendar spreads until a permanent solution is implemented by OM, Lee believes it is not doing enough to resolve the ongoing problems at the exchange. He said HKEx should improve the system with upgrades, added functionality and, most importantly, the ability to handle larger volumes. “They’ve told us not to press many quote [requests],” he said. “Sometimes when you need the market you press the quote request and the market responds, but sometimes if the quote request is pressed too many times it crashes.”
Last May, a dead battery in the exchange’s back-up trading system was blamed for a halt in futures and options trading that lasted for an hour.
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