Toronto Stock Exchange Reopens Today After Hardware Failure

(Bloomberg) -- The Toronto Stock Exchange reopened Monday after an “unprecedented” hardware failure shut down trading for more than two hours Friday afternoon on Canada’s main stock and derivatives bourses.

TMX Group Ltd., which operates the exchange, said the failure was in a storage device that had been running for more than a year with no problems. The device had a backup in case of failure, but the issue prevented it from engaging. It was not the result of a cyber attack.

“The manufacturer never saw this before,” Lou Eccleston, chief executive officer of TMX, said in a phone interview Monday. “It’s not a budget issue, it’s not a capacity issue, it’s not a trading-system reliability issue.”

Eccleston declined to name the manufacturer, but said its engineers are on site monitoring the replacement device and working on a software patch “so it will never happen again even once in a lifetime.”

The last trading disruption on the TSX happened on Dec. 17, 2008, when a computer failure prevented quotes from being disseminated.

TMX shares fell 1.5 percent to C$77.64 at 12:29 p.m.

Regaining Trust

The company said it began remediation measures Friday afternoon, which included replacing the defective storage module, verifying the integrity of all impacted databases, and conducting a start-up validation of the trading system. The exchange owner said it couldn’t engage disaster recovery systems in time to ensure an orderly market re-open and closing session, so the market remained closed for the remainder of the day.

Eccleston said TMX is now focused on winning back client trust.

“Of course we have concerns, we’d be foolish or arrogant not to have concerns, but we’re the preferred venue for a reason and we intend to continue that,” he said. “All you can do is work through it and earn back the trust.”

TMX-owned exchanges, which include the TSX Venture for small companies and TSX Alpha, accounted for about 61 percent of the dollar value of stocks traded in Canada in March, according to data from the Investment Industry Regulatory Organization of Canada. Fewer than 575 million shares traded Friday, the slowest session since July 24, according to data compiled by Bloomberg. Volume was about 19 percent below the 100-day average on Monday.

The shutdown prompted traders to turn to rival exchanges to place orders, including Nasdaq Inc. Canadian equity trading is spread out across a variety of trading platforms, as it is in the U.S., allowing exchanges to pick up the slack if one fails.

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