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Software glitches are the chief cause of equity trading outages, according to a new report from the International Organization for Securities Commissions (IOSCO).

The umbrella group of global regulators published a report that examined market outages between 2018 and 2022, and found that software failures were the primary cause.

In particular, failed updates, unexpected and invalid instructions from exchange members, and delays in restarting trading systems after scheduled maintenance caused the majority of outages.

Hardware issues, including memory-module failures, power disruptions and storage appliance problems, accounted for the next largest share of outages. In some case, both hardware and software issues were involved.

Other sources of trading disruptions included operational and system capacity issues, network problems and events such as fire alarms.

“Market outages can be highly disruptive, particularly if they occur on a listing trading venue, potentially impacting price discovery, market resilience and the integrity of financial markets more broadly,” IOSCO noted, adding that outages can significantly impact market participants such as traders, investors and brokerage firms.

IOSCO’s report proposed a series of practices designed to improve market-wide resilience in the event of outages, including publishing outage plans, implementing communications plans that ensure market players get timely status updates and understand reopening plans, and developing processes and procedures for holding a closing auction or establishing alternative closing prices in situations where trading is disrupted.

The report also recommended regulators conduct thorough post-mortems on disruption incidents and undertake remediation, with the goal of preventing future outages and improving trading venues’ responsiveness.

“These good practices aim to assist regulators, trading venues and market participants in preparing for, and managing, future market outages and thereby helping improve market-wide resilience,” IOSCO said.

While the report focuses on listed equities trading venues, IOSCO said its findings are also relevant to derivatives trading venues and non-listing markets, among others.

The consultation on the issues raised in the report and IOSCO’s recommendations runs until March 1, 2024.