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Yesterday's 3-hour system breakdown in SGX's trading system couldn't have come at a worse time for the exchange.
Not that there is any good time for the system to go offline because of the frustration it brings, but when it lasts as long as it did and when it comes after the exchange has come under fire for the way the market has slumped over the past year, you'd have to wonder - has SGX lost the plot? And if it has, what will this do to confidence that is already fragile?
The penny stock crash of a year ago is one source of constant criticism but this is one area where I think criticism of SGX is largely unwarranted. It may have been clumsily handled by the exchange but then such episodes are bound to be difficult to deal with to everyone's satisfaction. However, there are other areas for which some criticism may well be justified - for example, the introduction of low-quality, non-performing IPOs, removal of the $600 cap on clearing fees which means large trades now incur very much more costs than before, spending hundreds of millions on a slick new high-speed trading system that breaks down too often, and removal of the lunch hour which many have pointed out has not led to improved liquidity and instead only alienated the remisier population. When you really think about it, remisiers are actually SGX's frontline salespeople, and many have questioned - quite reasonably - why they should be expected to work without a lunch break.
All of which leads up to the question asked earlier - has the exchange somehow lost its way?
As far as yesterday's system glitch goes, many dealers are asking a) whether it is fair that their already-low income has to be adversely affected by SGX's system inefficiency and b) whether some sort of monetary penalty is appropriate. On this latter point, one dealer quite reasonably pointed out that SMRT and the telcos were fined by their respective regulatory authorities, so would MAS do the same for SGX?
I don't have ready answers to these questions but I do think that SGX needs to get its act together if confidence is to return in any big way. A possible starting point might be to actually listen to what brokers have to say.