The Singapore Exchange (SGX) faced a major trading disruption on Wednesday (3 December 2014) as the result of unforeseen circumstances due to a software update done over the weekend.
According to the securities and derivatives market, the problem stemmed from a back-end customer accounting system that SGX hosts for some brokers. The updated system was said to issue erroneous reports for trades done on Monday and Tuesday. These reports were used by brokers to keep track of clients' position limits and margins.
Even though the problem was rectified before trading day started, SGX delayed the opening of the trading on Wednesday to 12.30pm from the usual 9am. In a press conference, SGX's CEO Magnus Bocker said that doing so was a "conscious and deliberate" decision to allow brokers to consolidate their processes to get ready for trading.
Bocker added that retail investors made up the bulk of affected market participants. Delaying the start of trading would thus give affected brokers time to reconcile their positions to enable all players to trade equally.
Responding to this incident, the Monetary Authority of Singapore (MAS) has instructed SGX to conduct a thorough review of its systems to address the shortcomings that led to the lapse. The central bank also said that it would take supervisory actions against the bourse operator if necessary.
A spokesperson for MAS said, "MAS has registered its disappointment and concerns with SGX over the delayed opening of its securities market caused by a software defect. The lapse is unacceptable, coming within weeks of the recent power breakdown." The last major disruption, which happened on 5 November 2014, caused SGX to shut down for almost 3 hours due to a power fault.
The Securities Investors Association (Singapore) (SIAS) has also called on SGX to resolve its issues quickly. "If disruptions happen too often, it will cause panic among the investors and will erode confidence in the market," said president and CEO of SIAS David Gerald. "SGX needs to address this problem urgently to avoid a recurrence, especially in this period of low market volume."
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