Not-for-profit member organisation Plato Partnership has announced new standards for managing cash equities market outages.
Mike Bellaro, chief executive at Plato Partnership
The new standards have been developed by Plato member firms with discussions having taken place between European exchanges including Deutsche Börse, Euronext, SIX Swiss Exchange and Nasdaq OMX.
Among the five proposed standards is the communication of order and trade status, in which trading venues are obliged to communicate order and trade status to members within 30 minutes of an outage.
Plato added that the communication will include an outage timestamp marking orders placed, and trades executed, before the outage timestamp as valid while those placed after will be void and cancelled upon service restoration.
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Elsewhere, as part of the new standards, all orders in the order book at the time of an outage will be purged prior to market re-opening, without exceptions for different order types. Plato highlighted the importance that some Exchanges may decide, depending on the order integrity, not to perform a global purge.
Following an outage, the new standards would require market re-opening protocols, wherein a standard 15-minute notification period to re-open will be provided to market participants and an additional 15-minute pre-open period will be applied for insertion, amendments and cancellations.
“At Euronext, we are committed to upholding the highest standards of market integrity and operational resilience,” said Nicolas Rivard, global head of cash equity and data services at Euronext.
“These proposed guidelines align with our ongoing efforts to enhance market stability and provide our clients with the assurance they need during volatile periods.”
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The new standards will also require all trading venues in an outage to apply a standard cut-off time to declare the closing price of 17:00 UK / 18:00 CET.
In an instance where an outage prevents a closing auction taking place prior to the cut-off time, Plato stated that the determination of the official closing price should be applied in the following order by the trading venue: last traded price where the continuous phase has commenced; opening price where the continuous phase has not commenced; prior closing price where the market has not opened.
Rounding off the five proposed standards is enhanced trading venue communications. This would require trading venues to maintain resilient communication channels, including providing status updates every 15 – 30 minutes during an outage, even if there are no new updates.
Plato stated that while not all standards have been agreed by all exchanges, where standards have been agreed, venues will amend their market outage policies and/or playbooks in the coming weeks.
The standards seek to bolster the resilience, consistency and transparency of market operations during outages.
They were developed in close collaboration with the Financial Conduct Authority’s (FCA) working group on market outages, who are developing standards for UK trading venues, ensuring consistency across both UK and European trading venues for market participants.
“By working closely with Europe’s leading exchanges, we’re making a tangible step toward ensuring markets can function smoothly despite unexpected challenges,” said Mike Bellaro, chief executive of Plato Partnership.
“This isn’t just about improving procedures – it’s about safeguarding the trust and integrity of the entire trading ecosystem.”
Read more: Market outages are one area where UK and EU could collaborate amid divergence, says Cboe
Earlier this year, a liquidity landscape report from Liquidnet highlighted market outages and resiliency as one of the ‘must watch’ areas for both regulators and market participants.
To combat these issues, the market must take an approach of individual responsibility in making the eco-system function optimally, the firm noted in its report.