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HKEx Commits Itself To Action To Avoid Repetition Of UPS Failure And To Improve The Overall Robustness Of Systems

Date 26/06/2002

Hong Kong Exchanges and Clearing Limited has committed to implementing short and medium term actions to avoid repetition of the incident that led to the suspension of derivatives trading on 28 May. The actions were recommended by an independent consultant, Ove Arup & Partners Hong Kong Limited, which was commissioned by HKEx to review the causes of the failure of the Uninterruptible Power Supply (UPS) to the primary data centre of the derivatives market, which led to the temporary market closure, and to make recommendations for improvements.

HKEx has also introduced additional contingency procedures to improve communication and information dissemination to Exchange Participants and the market in case of market suspension, and subsequent trading resumption arrangements, if so decided.

Ove Arup found that the root cause of the UPS failure was the malfunction in the inverters in the UPS, which invert DC power from the batteries to AC power supplied to the trading system. This ultimately caused the shut down of the UPS.

Mr Kwong Ki-chi, chief executive of HKEx, said the company had accepted all the recommendations of Ove Arup and was committed to completing all the short term recommendations of Ove Arup by the end of July and all medium term recommendations by the end of October. "We are also examining how best to address the long-term recommendations," Mr Kwong said.

Short term improvements relate primarily to the proper calibration and adjustment of the UPS units.

Medium term improvements include replacing the UPS system with a new system to better meet the requirements of the data centre in which the HKATS system is maintained. A new central system to monitor the UPS system will be installed.

Long term improvements relate mainly to environmental issues, including the provision of back-up generator, and improvement to the air-conditioning system.

On the overall performance of HKEx's IT operations, Mr Kwong said, "We are committed to improving the reliability and robustness of our IT operations. During the past six months, we had embarked on a programme with a view to raising the quality of these operations. We shall continue with this improvement programme, and expand it to include comprehensive reviews of HKATS, and its satellite systems, and of our other mission-critical systems by external consultants.

"The HKATS comprehensive review will commence in July and be completed in stages by late February next year," Mr Kwong said.

He said HKEx had detailed contingency procedures in place and they had been closely followed in the handling of the incident on 28 May. "However, following the incident, we have identified room for improvement and have introduced additional procedures to strengthen our contingency plans," he said.

"These include improving the procedures for the provision of timely and accurate information to the market if there is trading interruption; and for ensuring that the market knows what steps HKEx will take if there is a temporary market closure.

"We are also reviewing our contingency procedures with a view to clarifying the criteria for market resumption following a temporary market closure. We will consult the SFC on the revised contingency procedures before finalising them. Trading resumption principles will be announced to the public so that the market has a clear understanding of HKEx's trading resumption policy.

"I expect the revised procedures to be completed and implemented by the end of July," Mr Kwong said.

Ove Arup's full report will be posted on the HKEx website on 4 July.