Group Co.
TMX Outage: A Wake-Up Call for Canadian Capital Markets and Our Regulators
Traders Magazine Online News, May 7, 2018
A technology outage occurred around 1:40 pm on Friday, April 27, 2018 and it brought all marketplaces operated by the TMX offline. The impact was widespread. We saw considerably reduced trading in TSX and TSXV-listed securities; many investors were left uncertain about the status of their orders; and there was a real risk of mispriced trades. This happened despite the fact that multiple other marketplaces facilitating trading of these securities, including NEO, were fully operational. All other marketplaces, including ourselves, continued to process orders and trades in TSX and TSXV-listed securities, as well as in our own listed securities, without any issues.
What happened?
The graph below compares consolidated trading volumes in TSX and TSXV listed securities across all marketplaces between April 26 and April 27 and provides us with a good overview of what happened on April 27:
Between 1:00 pm and 2:00 pm, the TMX goes off-line. Trading continues on other marketplaces, but overall volumes drop considerably.
Between 2:00 pm and 3:00 pm, overall volumes remain low as traders with “live” orders on the TMX are uncertain about status and not sure whether they should or should not re-route to other marketplaces.
Between 3:00 pm and 4:00 pm, overall volumes start to pick up again after the TMX declared its marketplaces were out for the rest of the day and confirmed cancellation of orders in their systems. But overall volumes remained affected because a large part of the investor community was blind, with no access to market data. Who? Retail investor and Investment Advisors.
On July 8, 2015 the US markets experienced a similar issue when the NYSE went down for about 4 hours. The key difference? No one was impacted and trading in NYSE-listed securities continued as normal without any interruptions, slowdown in activity or mispricing.
Thus, an obvious question: why is such an event seamlessly handled in the US, while in Canada it heavily impacted trading?
Why is the US experience different than the Canadian experience?
Before I get into the reasons for this, I would like to first and foremost state that no one should point the finger at the TMX and blame them for what happened. May those who have never experienced technology issues throw the first stone. I won’t, because we are all exposed to technology glitches and while a lot can be done to mitigate the risk of it happening, no one can give a 100% guarantee it will never happen.
Let’s get back to the reasons why the experience in Canada is so different than the experience in the US when a listing stock exchange experiences a major outage. I see two main reasons:
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