SGX shuts market, reopening questions about bourse's reputation

Singapore

A TECHNICAL glitch prompted the Singapore Exchange (SGX) to suspend one of its platforms for the fifth time in two years on Thursday, frustrating traders and raising concerns about the market's reputation.

The securities market had been open for just 21/2 hours when it was shut down at 11:38 am. SGX said the move was due to duplicate trade-confirmation messages being generated, although no duplicate trades were executed.

Trading was supposed to resume at 2 pm, but this was later pushed back to 4 pm to allow for member reconciliation to be completed.

When the exchange could not meet that second target, it shut the market for the day. It was still unclear at 7 pm whether the market would open as usual on Friday.

Market makers, particularly those who provided prices for exchange-traded funds, announced that they had suspended market-making activities.

The Straits Times Index was last at 2,906.89, down by 0.13 per cent or 3.76 points.

Securities Association of Singapore chief executive Melinda Sam said: "I can only sigh. My members are all scrambling. This is too frequent ... Nobody likes these disruptions. It causes inconvenience and some losses because some of the orders have to be fulfilled."

She said the delay in reopening the market was due to members receiving reports with the wrong data during the reconciliation process.

One trader said it had been a quiet session before trading was stopped. Market participants got an inkling that things were not right when orders were not being matched.

"It's just frozen there, nothing's getting matched," the trader said just after noon. "One concern is some people may key in double or triple, not knowing what's going on."

CMC Markets market analyst Margaret Yang said investors who had tried to do naked shorting - selling short shares before borrowing them - may be exposed. If they cannot cover their positions, they will have to pay the exchange a hefty fee for delivering on their behalf.

She said: "Tomorrow, what they can do is try to borrow the shares in-house, from the Central Depository or from other channels.

"But there might be insufficient shares for them to borrow, so no choice, some of them may have to buy in. And buy-in penalty charges are pretty high."

There were also concerns about the impact of this incident on the market's reputation.

IG market strategy Bernard Aw said: "The suspension will definitely dent confidence in the local stock market."

Thursday's stoppage was the latest in a number of technology-related disruptions exceeding half an hour over the last two years.

Coming on the anniversary of SGX chief executive Loh Boon Chye's appointment at the helm, it raised questions about the operational competence at SGX and the risk of punitive action by regulators.

Securities trading had to be suspended in November 2014 after a power outage at a data centre.

The following month, the market's open was delayed because of a glitch in a client-accounting system hosted by SGX.

Then, in August and again in October 2015, the derivatives market was shut down for more than an hour each time, after some market participants experienced connectivity problems.

The November 2014 incident eventually drew a reprimand from the Monetary Authority of Singapore (MAS), which has barred SGX from raising fees for the securities and derivatives market until it has completed improvements to the regulator's satisfaction.

The moratorium on fees has not been lifted, and Thursday's outage may have extended the timeline for that to happen. A fine is also possible.

SGX has indicated that technology-related capital expenditure will be between S$70 million and S$75 million for the year ended June 30.

MAS said that it is monitoring the situation.

If the market opens on Friday as normal, investor sentiment will be dictated by the Bank of England's overnight policy announcement, CMC's Ms Yang said.

"The futures market is actually doing very well, even though the cash market is disrupted.

"SIMSCI (MSCI Singapore Index) is up 1.1 per cent. If the Bank of England cuts rates, there's a high chance the market will open higher tomorrow."