A preliminary indication of issues emerged around 9:41 p.m. Eastern time on Thursday, during a period when the majority of Wall Street was closed and market participants were still observing the Thanksgiving break in the United States.
TL;DR
- CME Group futures and options markets halted due to technical issues at an Aurora, Illinois data center.
- Cooling infrastructure failure caused temperatures to exceed 100°F, disrupting global financial markets for hours.
- The 10-hour disruption highlighted market concentration and reliance on few major trading platforms.
- CME trading functions, including CME Direct, fully resumed on Friday after the cooling system issue.
“Due to technical issues,” CME Group Inc. Said in a one-line email to clients, its futures and options “markets have been halted.”
It was discovered that the issue stemmed from the cooling infrastructure at a data-center facility located in the suburban community of Aurora, Illinois, approximately 50 miles (80 kilometers) away from Chicago. This site functions as the primary nexus for trillions of dollars in derivatives exchanged daily. Within the facility, temperatures climbed above 100°F (38°C), even with the cold external conditions, as reported by individuals acquainted with the situation.
At that moment, the CME's intelligence suggested the disruption at the site—managed by CyrusOne, a company owned by private equity—would be short-lived, according to an individual familiar with the circumstances. Consequently, the decision was made not to transition to a reserve facility located close to New York City.
However, it wasn't long before the significance of that critical choice became starkly evident. Notwithstanding a barrage of communications from CME reassuring customers the issue would be resolved in the “near term,” the system failure continued, disrupting substantial segments of the worldwide financial network for an extended period. Across continents, from Tokyo to London, and ultimately reaching New York, commerce involving commodities like gold and oil, as well as predictions regarding US interest rate movements, ceased unexpectedly.
Despite trading largely resuming on Friday, issues persisted throughout the US trading period, as CME Direct, an exchange-operated trading system, remained inaccessible for the majority of the day.
The disruption highlighted a weakness within interconnected worldwide markets dependent on a few major trading platforms. It also prompts inquiries regarding the backup strategies of CME, a leading global marketplace for derivative agreements, and its significant dependence on the data facility it divested in 2016 to CyrusOne, an entity now under the ownership of KKR & Co. And Global Infrastructure Partners.
The shutdown “shows how concentrated futures markets really are — there just aren’t many alternative venues for the main products,” said Thomas Texier, group head of clearing at Marex Group Plc, a London brokerage.
The 10-hour disruption exceeded the incident that affected CME in 2019 and further highlighted the exchange's crucial role in global financial dealings. Data from the group indicates that in October, average daily trading volumes for derivatives reached over 26 million contracts.
Although it occurred on a day when US markets were anticipated to be quiet — owing to the Thursday holiday — it nonetheless proved troublesome for investors worldwide who were required to make adjustments at the end of the month by shifting their positions from one agreement to another.
A Singapore-based oil merchant recounted that upon the initial notification, they suspected a deception due to the ongoing flow of transactions and price indications. However, shortly thereafter, the display abruptly halted, and they were disconnected from The Nymex system. A merchant in London initially believed they were experiencing problems with Their Wi-Fi.
“We’ve had to trade some cash Treasuries today and it was noticeably thinner and wider,” said James Athey, a portfolio manager at Marlborough Investment Management Ltd. “Month-end, day after Thanksgiving, CME down. It’s not an ideal combo.”
As Friday's trading session concluded, CME had reinstated all its trading functions, encompassing CME Direct. An spokesperson for the exchange chose not to offer further remarks beyond the information shared with customers during the day.
CyrusOne stated that the issue stemmed from a mechanical malfunction that impacted the infrastructure responsible for cooling its computing environments and it was “working around the clock to restore normal operations as quickly and safely as possible.” The company indicated it had managed to reactivate multiple cooling units at reduced functionality and implemented provisional cooling apparatus to bolster its ongoing activities.
The precise cause of the CyrusOne cooling system malfunction remains unknown. However, the data center is equipped with a backup system and provides free cooling when ambient temperatures drop below 30 degrees Fahrenheit, as detailed on CyrusOne's official site.
For almost twenty years, the 450,000-square-foot Aurora facility has functioned as CME's main center for digital activities. It's well-known among high-frequency traders and financial institutions on Wall Street, who have consistently vied for locations near the premises to gain an advantage over rivals by reducing trade execution times by milliseconds.
In 2016, CME opted to divest its infrastructure holdings and transferred ownership of the facility to CyrusOne, a company based in Dallas. Under the terms of this transaction, CME committed to leasing space from CyrusOne for a duration of 15 years, enabling it to maintain the critical computer systems that support its market operations, effectively outsourcing its daily functions. KKR and Global Infrastructure Partners reached an agreement to acquire CyrusOne in 2021.
This hub has persisted as a vital point for merchants worldwide, with its influence extending widely. During London's trading period, for instance, the exchange of US Treasury futures ceased, gold experienced volatile fluctuations, and both US crude and palm oil on the Bursa Malaysia market also saw effects.
Despite the trading platform's return to operation, certain market participants were reluctant to resume transactions until they received confirmation that the issue had been resolved, as indicated by individuals with knowledge of the situation.
Others saw the occurrence during what’s typically a slow day in the US as one saving grace.
“I woke up thinking my Wi-Fi was out,” said Ritik Katte, chief investment officer at MCD Capital, a London-based investment firm. “Liquidity is lower than usual, so it seems like the Thanksgiving holiday has been extended.”