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 A "leap second" is being added to the world's clocks at midnight GMT
on Tuesday, which could test the extremely sensitive trading systems
of the modern algorithmic era, beginning with markets in Asia.
The addition of the leap second is a decision taken by the
International Telecommunication Union, a United Nations body, to
harmonize atomic time with the sometimes imprecise time taken by the
earth to rotate around its axis.
While there have been several occasions since 1972 that leap seconds
have been added to world clocks, this is the first time since 1997
that such a tweak is happening on a working day and in a high-speed
electronic trading environment.
The majority of global equity trading and a significant proportion
of trading in bonds, currencies, commodities and derivatives, is
done on electronic platforms governed by the international Financial
Information Exchange (FIX) protocol.
"On the FIX systems, the tolerance limits on an order may make it
look stale if the clocks are out of sync, which is the biggest
issue," said one head of electronic sales at a European brokerage in
Hong Kong.
Stock exchanges, brokers and investment banks said they were working
with their vendors and clients to ensure their internal clocks were
brought into line.
"No one's actually expecting a big impact. Tolerance limits are
usually more than a second anyway because clocks are not always
exactly aligned between clients and broker," the head of electronic
sales said.
"But these days, in the electronic world, one second is not an
insignificant amount of time. It's worth being diligent about it."
Intercontinental Exchange, a major network of exchanges for
financial and commodity markets, said it would delay market openings
which would normally occur between 2300 GMT on Tuesday and 0001 GMT
Wednesday by varying amounts of time. (https://www.theice.com/leap-second)
The CME Group, formerly the Chicago Mercantile Exchange, said it was
delaying the CME Globex market open on July 1 by one second.
(http://www.cmegroup.com/company/leap-second.html)
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In Asia, the adjustment process varies among exchanges. Some, such
as those in Australia, South Korea and Japan are planning to "smear"
the extra second by adding a tiny fraction of a second to each
second over a period of a few hours, brokers said. Others said
they'd do it as a one-off adjustment.
The Singapore Exchange has told markets it would adjust its systems'
clock between 3 a.m. and 5 a.m. on July 2, a broker said.
The last leap second was added in 2012. Then, in outages similar to
the Y2K millennium problems, a few websites were affected.
Australia's Qantas Airways was among those affected as the leap
second addition affected its reservation systems and caused flight
delays.
"The problem in 2012 was an Amadeus outage caused by the leap second
bug," a Qantas spokesman in Sydney told Reuters on Tuesday,
referring to the software for the global travel and tourism
industry.
"We have sought and received assurances from Amadeus that they have
taken action to make sure that the same problem cannot happen again,
and we’re confident that there won’t be any impact on Qantas
operations on this occasion."
(Additional reporting by Siva Govindasamy in Singapore; Sarah
McFarlane in London; Editing by Raju Gopalakrishnan)
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