NZX hires EY to review clearing system glitches

NZX said the root cause of the breakdowns appears to be an about four-fold increase in trading volumes since early this year. Photo / File

Stock exchange operator NZX said it has hired accounting firm EY to conduct an independent review of its technical problems over the last six trading days and is reviewing a range of hardware upgrades to increase processing throughput.

It is also working with clearing system vendors to split certain functionality into different processing streams to improve throughput and engaging with software suppliers to market participants to optimise the interconnection between them and NZX's system and the registries to try to reduce system stress.

The measures follow mounting frustration from stock brokers over the number of breakdowns, which they said meant staff working long hours to deal with backlogs caused by the problems, and calls for an independent review.

NZX said the breakdowns it has been experiencing primarily involve its clearing and settlement system and that the root cause appears to be an about four-fold increase in trading volumes since early this year.

"We appreciate how frustrating this is for participants and their clients. We deeply regret the disruption these issues have caused and solving them is our number one priority," said chief executive Mark Peterson in a statement.

"NZX takes its responsibilities as market operator extremely seriously. These issues have resulted in considerable strain on the operations and technology teams of NZX participants and flowed through to their customers at a time when there is a huge amount of interest – and unprecedented demand – in the New Zealand share market," the statement said.

Canvas all solutions

The EY review will include independently interviewing participants and vendor suppliers and NZX has also established a board committee chaired by director John McMahon "to ensure all possible solutions are canvassed and ensure market participants and regulators are involved appropriately."

NZX's monthly metrics report showed trading value in March of $6.54 billion was up nearly 68 per cent on March last year with the daily average value of $297 million up nearly 60 per cent.

On-market trading value was up 124.3 per cent to $4.13b in the month, accounting for 63.1 per cent of total trading value, up from 33.6 per cent in March last year – increasing on-market trading has been one of NZX's key priorities.

The number of trades at 1.15 million was up 290 per cent, indicating a lot more lower-value trades, and daily average trades were 52,348, up more than 272 per cent.

Peterson said NZX has had a trading system upgrade project underway since 2019 but, as a result of Covid-19 delays and subjected to Covid-19 developments and market feedback, it is now expected to go live later this year.

Capacity for growth

It will include the shifting of non-settlement functionality off the clearing and settlement system and onto the upgraded trading platform and is expected to provide sufficient capacity for significant further trading volume growth.

NZX said that, since the Covid-19 outbreak, volume activity in the market has hit records.

Chair James Miller said the board "is fully committed to working cooperatively with NZX's various technology partners and all industry participants to ensure these issues are resolved in as timely manner as possible."

NZX shares closed at $1.28 yesterday and are down nearly 6 per cent year to date.