SGX trading outage throws wrench in revival efforts

SINGAPORE — What was meant to be a 2.5-hour trading halt turned out to be a full-afternoon shutdown for the Singapore stock exchange on Thursday (July 14), causing the bourse to lose half a day’s volume and throwing a wrench in the Singapore Exchange’s (SGX) efforts to revive investor confidence amid a lacklustre market.

The SGX ceased trading on its securities market at 11.38am on Thursday “due to duplicate trade confirmation messages being generated”, saying initially it expected to resume trading at 2pm. It did not elaborate, but said that “message reconciliation” was underway and no duplicate trades were executed. However, it later postponed the target time for reopening to 4pm, only to miss that target as well and suspend trading for the rest of the day.

“SGX informs that the securities market will not resume trading at 1600 hours and will not reopen today,” it said in a statement at 4.03pm.

SGX is home to South-east Asia’s largest stock market, with total capitalisation of US$494 billion (S$663 billion), according to data compiled by Bloomberg. About S$1.6 billion of shares changed hands on an average day in the past 12 months.

“Trading volume in securities has already fallen substantially for the last few years. Such disruptions may vindicate traders’ lack of interest in trading local securities,” said Mr Bernard Aw, a market strategist at IG.

“I believe that the reconciliation of the duplicated messages took longer than they thought. On hindsight, it is better if they don’t give a targeted restart time. But not giving a time will be equally bad, when traders and dealers are anxious for answers.”

Yesterday’s disruption took place smack on CEO Loh Boon Chye’s first-year anniversary at SGX. Mr Loh took over the helm at SGX on July 14 last year, replacing Mr Magnus Bocker, who had been CEO since 2009.

Mr Bocker left SGX several months after making a public apology on December 2014, following two trading disruptions in as many months. On Nov 5, 2014, SGX declared a formal trading halt at 2.51pm, citing a disruption in power supply. The securities trading platform reopened more than two hours later, while the derivatives market reopened at 7pm. Barely a month later on December 3, SGX opened its securities market 3.5 hours late because of a software error.

Those disruptions led to a reprimand in June last year from the Monetary Authority of Singapore (MAS), who directed SGX to improve its recovery capabilities and processes.

However, in August last year, trading on the derivatives market was temporarily suspended for nearly two hours due to a technical fault.

The central bank said yesterday it was monitoring the latest outage situation closely.

“SGX has informed MAS that it has ceased trading on its securities market since 11.38 am today due to a technical issue. We understand that SGX is currently working with affected members to rectify the issue. MAS is monitoring the situation closely,” an MAS spokesperson said.

Trading outages are not uncommon in other jurisdictions as well. Malfunctions at Deutsche Boerse, Europe’s biggest derivatives exchange, disrupted trading in February and July 2015, reported Bloomberg, while there was a one-hour halt in trading on Euronext’s derivatives products in March last year. The New York Stock Exchange had an outage a year ago that lasted 3.5 hours.

“Singapore is not the only financial centre where this sort of things happen. It has and is happening in the American and European markets, as well as in Hong Kong and Japan,” said Mr David Gerald, president and chief executive of investor rights watchdog Securities Investors Association Singapore (SIAS). “Investors must understand that this is one of the risk they have to take in this market, like investors in the overseas market understand this risk well,” he added.

However, some analysts said, the latest disruption does not bear well for SGX’s reputation. The bourse, which has struggled to attract large initial public offerings and generate significant daily stock turnover, has been making efforts to win back the confidence of investors and revive securities trading against the backdrop of increasing competition and volatile global market conditions.

“The fourth disruption in just two years does not help Singapore’s image as a leading financial centre … It is possible that they could have a bigger problem with their back-end system,” said Mr Aw.

Ms Margaret Yang, market analyst at CMC Markets Singapore, said on the positive side though, this latest incident could push SGX to improve its technology risk management going forward.

“Learning from this case would help them to prevent similar things from happening again, and enhance their incident-handling capability,” she said.

Total securities market turnover value at the bourse rose 4 per cent to S$22.5 billion in June from May, but fell 9 per cent compared to the same period last year. The securities daily average value was flat month-on-month and fell 13 per cent year-on-year to S$1 billion.

The IPO market has also been getting trounced: Companies that listed last year in Singapore raised US$366 million, according to data compiled by Bloomberg, the lowest amount since 2001. The amount was less than 10 per cent of funds raised from IPOs in Thailand, a third of Malaysia’s and half of Indonesia’s, Bloomberg data showed.

Only 13 IPOs were listed on the SGX last year — just one on the mainboard and the other 12 on Catalist – compared with the 30 IPOs in 2014. This year has seen better momentum, with nine initial public offerings so far.

SGX is scheduled to report its full-year results after the market closes on July 27.