LSE outage caused by matching engine logic isssue

The market outage yesterday saw trading suspended and affected securities close without auction, with only FTSE 100 and 250 and International Order Book (IOB) securities unaffected. Trading opened today as normal except for ETP RFQ functionality, which remains disabled. 

At 3.11pm yesterday (19 October) all instruments on Partition 3 of the LSE Order Book entered a ‘Halt’ state. BEST EXECUTION has learned that the issue was caused by a matching engine logic issue on Partition 3, affecting all instruments except for constituents of the FTSE 100 and FTSE 250 indices, and IOB.

According to LSEG’s ‘Guide to the Trading System’ documentation, a System Halt is invoked (at partition or market level) if and when the exchange determines that the outage is likely to be severe or long-lasting, with no best price subsequently disseminated and the orderbook remaining static. A Halt state is used if the exchange decides that there is no prospect of trading resuming on the day of the outage. A closing price is then set and disseminated, with the affected securities not reopening until the following day.

The problem yesterday, explained LSEG, is that the mirror process did not take over as would be expected in the case of a hardware issue. Further investigations identified that the root cause of the issue related to the Request For Quote (RFQ) functionality for Exchange Traded Products (ETPs).

Partition 3 was restarted to expire all open orders back to customers after the restore, a process that completed just after 4:45pm yesterday. “Given this timing, it was concluded that the closing auction for Partition 3 instruments should not be operated and that closing prices would be generated from the system based on trading up to the point of the Halt,” said LSEG.

Closing prices for the affected instruments were disseminated just after 5pm. Since there was no closing auction in impacted instruments and since all orders and quotes in affected instruments were deleted during the recovery activity, most closing prices were based on the last order book traded price on the day. Where there was not an order book trade on the day, the closing price would revert to previous day’s closing price.

“All LSE Order Book securities opened as normal on Friday 20 October. However, as a precaution whilst our detailed investigation continues into the root cause and remediation, RFQ functionality has been temporarily disabled in respect of all ETP securities, the only securities for which this functionality has been available.”