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June 30, 2015

A second too long

Will change in world clock disrupt financial markets?

Financial markets around the world will open on Wednesday with a tinge of apprehension, not just because of developments in Greece or China, but because of an extra second.

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.

Related article: One second longer

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. (

The CME Group, formerly the Chicago Mercantile Exchange, said it was delaying the CME Globex market open on July 1 by one second. (

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)