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SGX’s reputation hit by yet another disruption

SINGAPORE — The Singapore Exchange (SGX) delayed the trading of some derivatives contracts for several hours on Thursday (Dec 8) in yet another disruption that further dented the bourse’s reputation.

A Singapore Exchange (SGX) sign sits outside its premises at the central business district in Singapore, in this Jan 18, 2016 file photo. Photo: Reuters

A Singapore Exchange (SGX) sign sits outside its premises at the central business district in Singapore, in this Jan 18, 2016 file photo. Photo: Reuters

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SINGAPORE — The Singapore Exchange (SGX) delayed the trading of some derivatives contracts for several hours on Thursday (Dec 8) in yet another disruption that further dented the bourse’s reputation.

SGX said trading opened at 10am, more than two hours after the normal scheduled start for some contracts such as the Japanese Nikkei 225 index futures. Futures on the Nikkei 225 index, which usually start trading at 7.30am local time, began changing hands at about 10.15am. The delay also affected India’s Nifty 50 index futures, which usually start trading at 9am local time, as well as iron ore contracts, Bloomberg data showed.

“A specific issue relating to the expiring December Nikkei 225 futures contract delayed the opening in the Nikkei contract and some other contracts. This was detected by our monitoring processes and addressed immediately.

The affected contracts commenced trading per normal at 10am,” the SGX said in a statement. It had posted multiple updates on its website since 9am on Thursday informing traders and investors of the disruption. In its 12.23pm update, it confirmed the normalisation of all trading on its derivatives markets.

The Monetary Authority of Singapore (MAS) ordered the exchange to probe the cause of the latest disruption. “The MAS has instructed SGX to conduct a thorough investigation to find out the root cause of the delay and submit its investigation findings to the MAS,” a spokesperson for the regulator said.

“If you are aspiring to be a serious player in the global financial markets, then these kind of issues should not be happening every few months,” said Mr Ho Song Hui, assistant director of research and content at investment products distribution platform iFast.

The latest disruption follows earlier breakdowns that have piled pressure on SGX chief executive Loh Boon Chye as he tries to revive the fortunes of the bourse facing stiff competition in the region. 

The disruption comes after the SGX in July shut down trading in the securities market for about half a day “due to duplicate trade confirmation messages being generated”. In August last year, derivatives trading on the SGX was halted for nearly two hours due to a glitch, and in 2014, it was hit by two outages due to various technical faults.

Despite the latest problems, SGX shares managed to eke out a 0.7 per cent gain to close at S$7.40 each on Thursday, outperforming the flat performance in the benchmark Straits Times Index.

“In terms of the reputation, the over two-hour delay certainly does not bode well, but we can see that investors have not reflected this via SGX’s share price. Previous technical malfunctions have been recovered quickly so that lends confidence,” added Ms Pan Jingyi, market strategist at IG.

CMC Markets trader Alex Furber said: “It was a relatively short outage and the damage does not look to be serious this time, although loss of revenue would be likely as there are higher volumes at market openings. Reputation would be a hit, but the SGX is already struggling anyway. The impact was only on derivatives and I did not notice volume thinning out on the SGX equities market.”

The SGX is expected to set up by the second half of next year a subsidiary to carry out its role as regulator, more explicitly separating its regulatory functions from its commercial operations. The new subsidiary will be governed by a separate board of directors and its chairman, and the majority of directors will be independent of SGX, the bourse operator said in July. 

Major exchanges using this self-regulatory organisation model include the New York Stock Exchange and the London Stock Exchange. WITH AGENCIES

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