(Adds TMX CEO comment, background on retail investors in paragraphs 15-16)
By John Tilak and Fergal Smith
TORONTO, April 30 (Reuters) - Canada's stock exchange, the world's sixth largest, was back in business on Monday after a hardware glitch abruptly ended trading on Friday and the exchange operator TMX Group said it was working to ensure there will be no repeat of the embarrassing market disruption.
The shutdown was only the second to hit TMX in nearly a decade, but it could potentially encourage investors to explore alternative trading channels, fund managers and traders said.
"It was truly an unprecedented event," TMX Chief Executive Lou Eccleston told Reuters in an interview on Monday.
"We understand exactly what happened, so there's no mystery to that," he said. "We've got everything in place, including additional monitoring."
Eccleston did not identify the maker of the defective hardware, saying only that TMX was working closely with the company to prevent anything like what happened on Friday from recurring.
Trading resumed on Monday at 9:30 a.m. EDT (1330 GMT) after the outage ended Friday's session more than an hour before the official close.
The benchmark Canada stock index ended down 0.4 percent. TMX shares fell 2.4 percent on the day.
TMX Group, which operates the Toronto Stock Exchange and smaller Canadian trading platforms, said in an email sent to clients over the weekend and seen by Reuters that the outage was caused by a hardware failure in a communications management component. TMX had earlier ruled out a cyber attack.
"An outage like Friday's is very embarrassing for the TMX," said Michael Sprung, president of Sprung Investment Management. "Their focus will have to be on not succumbing to another outage in the near future that would be catastrophic reputationally and would result in a loss of market share to other exchanges," he added.
The Ontario Securities Commission has declined to comment on whether it was conducting an investigation of the outage, after saying on Friday that it was in contact with TMX.
"We're in constant contact with the regulators," Eccleston said. "They know everything (that is) going on. They know our action steps," he added.
The TSX, which has been buoyed recently by higher oil prices, edged up to a near six-week high at the open on Monday as financial and industrial shares gained. After a slow start, trading picked up toward the end, with some 202 million shares changing hands, compared with average daily average volume in April of 195 million shares.
"I think it is acting pretty well today," said Greg Taylor, portfolio manager at Purpose Investments. "Month-ends are usually the quietest day of the month because a lot of funds are precluded from trading on them," he added.
The saving grace for TMX, which has been vying to host Saudi Aramco's mega IPO overseas listing, was that the glitch occurred on a low-volume trading day as well as on a Friday, giving the operator the weekend to resolve the issue.
The long-term fix would include adjustments to the software, and could be made within days to a week, Eccleston said, adding that client data was not breached and the outage had nothing to do with trading volume.
Jos Schmitt, chief executive of rival operator NEO Exchange, said the market went dark when the outage occurred. "There is a lack of real-time market data in Canada and Friday's events demonstrate this is a big problem," he added, referring to retail participants' reliance on TMX trading data.
Outages can inconvenience investors and prove expensive for the exchanges themselves. Many of Canada's blue-chip stocks are also traded on U.S. stock exchanges, which gives investors another option.
TMX's exchanges in Canada, which include the Toronto Venture Exchange, TSX Alpha Exchange and the Montreal Exchange, account for about 61 percent of trading in Canada, according to official data.
Canada's last major trading outage occurred in December 2008, when a system fault linked to data feeds shut down trading for a full day.
"Stuff happens from time to time," said Matt Skipp, president of SW8 Asset Management. "If it happened on an epic down day, it would be far more concerning for professionals." (Reporting by John Tilak and Fergal Smith; writing by Denny Thomas; editing by Steve Orlofsky, Tom Brown and G Crosse)