The glitches that threw SGX trading into a gloom

SGX Centre 1 (left) at Shenton Way Road in the Raffles Place District.
SGX Centre 1 (left) at Shenton Way Road in the Raffles Place District. PHOTO: ST FILE

The Singapore Exchange (SGX) was rapped hard by the Monetary Authority of Singapore (MAS) over two major glitches that threw trading into chaos last year. Here is a low-down on what happened:

The Outages

The first incident occured on Nov 5, when a power outage at the SGX primary data centre halted trading for three hours.

The power outage, triggered by a voltage sag in both power lines to the SGX primary data centre, was caused by a combination of a faulty component in the emergency backup power supply generator and the inability of downstream switches to cope with this malfunction.

This was the bourse's worst disruption in seven years, which sparked complaints from market players on lost earnings.

A second one happened within a month on Dec 3, when the opening of the securities market was delayed by more than three hours owing to a software defect.

The Outrage

The Nov outage in SGX - home to one of the most established capital markets in the Asia Pacific - caused a malfunction, which meant the line prices stopped moving, causing panic in the markets.

"We didn't know if the order was accepted," said remisier Desmond Leong. "Initially, we thought it was just us. We then realised other brokerages didn't have access to the markets as well."

Trading volumes for that day had plunged to S$728 million compared with the then-average of S$1 billion.

In Dec, the opening delay led to only a turnover that was only 80 per cent of an average day's trading volume.

Deputy Prime Minister Tharman Shanmugaratnam had said that the November trading blip has affected Singapore's reputation as a financial centre.

Dismissing similar incidents in other financial centres, Mr Tharman said: "It doesn't matter what happens overseas. We've got to get it right here and make sure our reputation is kept intact."

A Board Committee of Inquiry was set up after the Nov incident to independently oversee probe into the incident, review the bourse's incident management and crisis communications.

The Reprimand

Yesterday, on a day the inquiry committee tabled its findings, MAS issued a formal reprimand to the SGX observing that the bourse's standards on service recovery had fallen on both occasions of glitches.

MAS also issued directives to SGX for several remedial actions, including strengthening of its monitoring system capabilities to allow timely and accurate problem identification, improve crisis preparedness and improve its crisis communication to provide prompt information to all stakeholders.

The SGX plans to implement all recommendations by the end of this year.

The Penalties

In line with MAS directives, the exchange has frozen any fee increases for securities and derivatives markets until system improvements demanded by the MAS are in place.

It also said that it will direct S$20 million of its capital expenditure budget to upgrade its technology infrastructure.

The SGX will make a S$1 million contribution to its Investor Education Fund, which runs educational programmes as well.

The Reactions

Most industry players have welcomed the remedial actions promised by SGX.

UOB Kay Hian senior executive director Esmond Choo noted that the heavy directives imposed by MAS "reflect the seriousness of the breakdown to the reputation of Singapore as a financial centre".

Remisier Desmond Leong said SGX's committment to ramp up its technology infrastructure is a good sign, said remisier Desmond Leong, noting that this will prevent recurrence of similar incidents.

"As an exchange, the system has to work. It cannot just shut down, or you will lose confidence from the investors, especially the foreign investors. This is a good step towards regaining investor confidence. ... Reliability is very important."

tsjwoo@sph.com.sg