Mr Kwong Ki-chi, chief executive of Hong Kong Exchanges and Clearing Limited, said the slow-down was caused by an interlock in the AMS/2 host computer system, which occurred when two transactions were assigned the same 16 digit time stamp. "The time-stamp is intended to ensure that all orders entered into the system are logged and processed in strict chronological order," Mr Kwong said.
"Under AMS/2, all orders are assigned to one of 16 Central Processing Units (CPUs) of the host computer system on a dynamic basis. Under normal circumstances, a different time stamp will be issued to each order. However, despite automatic synchronisation of the CPU clocks, there is a minute drift between the clocks of each of the CPUs, which is a limitation of the system hardware. The minute clock drift may on occasions cause the same time stamp to be assigned to two different orders in the same stock group. In such an unusual event, the trading system will be unable to decide which order to process first, causing an interlock.
"Working over the weekend, IT engineers at the Exchange identified the root of the problem and came up with two solutions -- an interim one to address the interlock problem as they arise and a permanent one to eliminate completely the possibility of the same time stamp being assigned to different orders in the same stock group. The interim solution will be introduced immediately so that the interlock problem, if it should arise again, can be resolved within seconds. The permanent solution will take about two weeks to develop and install. It involves creating a new timer process, through a Stock Group Timer Program, to replace the order time stamp assigned by the 16 different CPUs.
"The Stock Group Timer Program will handle on the same CPU the assignment of all the time stamps within the same stock group. This will avoid the clock drift problem between CPUs and ensure the uniqueness of individual time stamps assigned to all orders within the same stock group.
"In the meantime, the Exchange installed the software for the interim solution over the weekend. Under the interim solution, the system will automatically release the interlock and request traders to re-input their interlocked orders within seconds. The interim solution will be operating when trading resumes tomorrow, 10 July," Mr Kwong said.
He confirmed that the same problems will not arise in AMS/3 as it has a totally different design in the determination of chronological priority for orders. Hong Kong Exchanges and Clearing Limited will submit a full report on the incident to the Securities and Futures Commission giving details of the cause of the problems and their solutions.
Mr Kwong emphasised that Hong Kong Exchanges and Clearing Limited was as committed as ever to providing a continuous, orderly and reliable trading system. "Every effort will be made to ensure system stability," he said.
