Earlier this week the ASX restricted trading times and even cancelled trades due to technical difficulties. So as investors what can we learn from this event and how can it improve our understanding of the way asset markets function?
We have all had endure technical issues at some time or other; a program crashing before you have saved your work, unable to open a corrupted file or worse still a complete hard disk meltdown. Whatever it is I feel your pain!
But what about the ASX?
We expect faultless execution from their platforms and systems – yet earlier this week the ASX trading system failed and the market had to deal with restricted trading times and even cancelled trades as the ASX struggled to get its systems running faultlessly.
The ASX spend millions each year on technology and security in order to ensure they provide a robust and stable clearing house guaranteeing faultless settlement. SO you would think that this sort of event could shake investors’ confidence to the core.
Yet this occurrence passed us by in the most nonchalant fashion. No gusto or fanfare here…..
However this event is an excellent example of both the impact of a non-credit related event and the psychology investors can have.
This episode, like that of the “Fat Finger” some years ago, is NOT credit related and as such cannot derail the investment locomotion that is the current bull market. Never confuse the impact of Credit and Non-Credit related events.
The ASX trading freeze came after the XAO has fallen about 7% in its last retracement. The fact that panic did not set in and in fact the market was able to gain some points helps give us a hint as to the psychology of investors out there.