Why It Matters

Lifting the fog on SGX disruption

The cause of the longest securities trading disruption on the Singapore Exchange (SGX) remains largely unclear for now. Despite media questioning last Friday, SGX chief executive Loh Boon Chye gave only some clues to the cause of a "technical issue" that affected trade confirmation processes and led to the shutdown of the bourse for more than five hours on Thursday.

Mr Loh said it was not a capacity issue, meaning the trading system did not crash due to heavy trading. He added that the glitch was "discovered with a trigger to hardware".

But it may become clearer this week after the Monetary Authority of Singapore (MAS) said on Friday that it took a "serious view over the closure" and "instructed SGX to address the root cause of the problem". The SGX said it would "commence on a post-mortem and update with more details, including the cause", by this week.

Investors are troubled by this latest breakdown - a far longer trading disruption than the two major outages in late 2014 that prompted a sharp reprimand from MAS. Observers say the latest breakdown is a particular embarrassment given the Government's Smart Nation and fintech initiatives. They add that the timing could not be worse as the SGX is in talks with the Baltic Exchange, and facing competition from other major exchanges.

Questions have been raised over whether the SGX will be slapped with a fine given the severity of the disruption. The penalties in 2014 stopped short of a fine, but the SGX was barred from raising fees for the securities and derivatives market until system improvements were put in place. So far, the moratorium on fees has not been lifted.

The SGX is not alone in facing technical breakdowns. But traders say the local market has been suffering thin trading volumes in recent years and growing competition in the region, adding that the latest disruption does not bolster confidence.

They say it would help if the SGX gives details as soon as possible on what happened and, more importantly, what can be done to prevent more trading disruptions.

A version of this article appeared in the print edition of The Straits Times on July 18, 2016, with the headline 'Lifting the fog on SGX disruption'. Print Edition | Subscribe