February 28, 2020 / 3:08 PM / a month ago

UPDATE 2-Canada's biggest bourse adds capacity after record orders sparked outage -CEO

(Recasts with interim CEO interview, adds trader comment)

By Nichola Saminather

Feb 28 (Reuters) - TMX Group, the operator of Canada’s biggest stock exchange, has added more capacity to handle orders after record volumes the previous day caused a technical glitch and halted trading, its interim chief executive told Reuters on Friday.

Canadian shares slumped on Friday when trading resumed after the TMX’s messaging system collapsed under the weight of order flows, leaving investors stranded during a market bloodbath.

TMX witnessed a 225% jump in trading orders on Thursday from the previous few months’ average, John McKenzie, TMX’s interim CEO, said in an interview, forcing TMX to halt trading on the Toronto Stock Exchange, TSX Alpha and TSX-Venture exchanges.

Trading orders peaked at just under 190 million by 1:30 p.m. ET on Thursday, McKenzie added. TMX has replaced the faulty appliance and added more memory capability, he said.

“It’s the first part of what we’re going to do for a long-term solution,” McKenzie said. “We’re still diagnosing root cause and... identifying if there are other architectural changes we should be making over the long term to make it even more resilient.”

The TMX is seeing even higher order volumes on Friday, but its systems are holding up, McKenzie said, adding it has been responding to questions and providing updates to the regulator.

Regulator Canadian Securities Administrators “continues to engage with TMX staff, according to the regulatory requirements” a spokeswoman said by email.

The Canadian stock benchmark pared early losses of as much as 4.8% to trade down 3.1%, on track for its lowest close since August. Stocks globally are set for their largest weekly fall since the global financial crisis.

Further complicating the picture was the timing of the outage, just ahead of the end of the month and the week, when traders close out positions, and before index provider MSCI Inc’s quarterly rebalancing takes effect on March 1.

“There’s a lot of cross-turns here ... It’s imperative that (the exchange) functions perfectly today,” said Greg Taylor, portfolio manager at Purpose Investments.

Shares of Toronto Stock Exchange operator TMX Group lost 2.6%.

While institutional trades could be routed to other exchanges, many retail networks would have been shut out, Diana Avigdor, head of trading at Barometer Capital said. Concerns about possibly duplicating open orders would have also kept some investors from moving to other exchanges, she said.

In April 2018, a failure of data storage equipment caused an outage, with back-up measures also failing to engage. (reut.rs/2Tmg1SK)

Reporting by Nichola Saminather in Toronto; Additional reporting by Abhishek Manikandan in Bengaluru; Editing by Saumyadeb Chakrabarty and Nick Zieminski

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