Canada’s main stock exchanges said all systems are ready for the start of business on Friday after halting trading for hours due to a technical issue.

The Toronto Stock Exchange said interruption was caused by a system capacity issue within the messaging technology component of TMX Group Ltd.’s trading engine. The bourse said it has undertaken necessary measures to mitigate the risk of recurrence and that the incident was not the result of a cyber-security attack.

Exchanges operated by TMX stopped trading shortly before 2 p.m. Eastern time Thursday and did not re-open. The S&P/TSX Composite Index was down 1.9 per cent at the time. Major U.S. benchmarks dropped more than four per cent after falling sharply in the last hour of trading.

TMX Group will be left with a “black eye,” Thomas Caldwell, chairman of Caldwell Securities Ltd. and chairman of the rival Canadian Securities Exchange, said in a phone interview. “It’s a terrible thing to happen, particularly in a cataclysmic market that we’re currently experiencing this week that people either want to trade, need to trade, want to get out or want to get in.”

Toronto-based TMX had said in a series of tweets that clients were not able to enter, modify or cancel any open orders on the Toronto Stock Exchange or the TSX Venture and TSX Alpha exchanges. At about 3:20 p.m. the company said its markets would remain closed for the rest of the day, leaving traders scrambling for alternatives. The three exchanges had seen 660 million shares traded up to that point, according to TMX Group’s website.

TMX Provides Update on Market Outage and Confirms Friday Market Opening - read the release for details: https://t.co/X5KFQMaM3J pic.twitter.com/xXz90RceMR — TMX Group (@TMXGroup) February 28, 2020

High Volume

The halt comes in the midst of a week-long dive in global markets as anxiety over the spread of the coronavirus weighs on equities. Heavy selling may have contributed to the technical problem.

In the first three days of the week, investors traded an average of 305 million shares a day in TSX Composite stocks, according to Bloomberg data. That is 41% higher than the average daily volume in the three months ended Feb. 26.

“I don’t know the inside of what happened at the TSX. What I can tell you is in the last couple of days we have seen a substantial increase in order flow, in our market also,” said Jos Schmitt, President and Chief Executive Officer of Aequitas NEO Exchange Inc., a competing exchange in Toronto. Schmitt made the comments in an interview on BNN Bloomberg television.

TMX Group had also halted trading in all equity derivatives on the Montreal Exchange.

To be sure, Canadian traders have the ability to divert some of their trades to rival exchanges such as Nasdaq Inc. and NEO Exchange. “Volume does, when it can, move away from our primary market, the TSX, into alternative markets and they can trade,” Diana Avigdor, head of trading at Barometer Capital Management, said on BNN Bloomberg. Volumes can decline due to technical issues “but it’s not impossible to trade,” she added.

TMX Group has been hit by outages before. In April 2018, the TSX and its derivatives market shut down for more than two hours on a Friday afternoon. TMX said that failure was the result of a defective storage module.

Caldwell said he thinks the event will raise hard questions for TMX Group. “Rest assured the commission are not going to give them a pass on this,” he said, referring to the Ontario Securities Commission. TMX will likely be asked what measures are being put in place so it doesn’t happen again, he added.

--With assistance from Divya Balji, Doug Alexander, Kristine Owram and Lianting Tu.