The Singapore Exchange (SGX) was hit twice by technical glitches early this month, something observers say could hurt its ambitions of becoming a world-class exchange. Should allowances be made for such glitches that could come as stock exchanges invest in new technologies?

Professor Kai-Alexander Schlevogt, Visiting Associate Professor at the National University (NUS) Business School, believes that as more transactions are conducted electronically, new risks are inevitable. In the case of the recent glitch in the Singapore Stock Exchange, which Prof Kai described as “quite serious” because the STI was misrepresented by 1.3 percent, officials at the Stock Exchange were able to simply apologize. “In the US, investors would be more aggressive and maybe even sue the stock exchange” pointed out Prof Kai.

However, any crisis, even the recent glitches on the SGX, can serve as an opportunity to take action, said Prof Kai.“The opportunity here is that this recent glitch serves as a wake-up call for the stock exchange really to change, because there were several glitches in the past."

Looking ahead, Prof Kai told Channel NewsAsia that the SGX should take steps to really upgrade the trading platform. "There are plans now to do it by the end of the year, but implementation will be another year. So maybe it can be sped up” he suggested.

Another suggestion is for the SGX to think about future scenarios. Prof Kai said that the SGX should think “what can go wrong in the worst case and then to develop a crisis management plan, because we are all humans, things can go wrong.”

While stressing that it’s important to be prepared, Prof Kai also gave a word of caution. “When the crisis strikes, managers have to be open, they have to be forthcoming with the information and they have to take action very swiftly, which might mean holding the trading for a time.”

Trading in derivatives linked to the STI has also been affected by technical problems. The recent glitch for instance impacted derivatives because many are linked to the stock index. In some instances, affected investors ended up losing twice on their options. This is a scenario which Prof Kai said the exchange should be careful not to repeat too often because it puts reputation at risk.

On the other hand, Prof Kai noted the efforts made so far by Singapore in this area, “the government has put in place a good vision of becoming a finance hub, focusing on private wealth in particular, and there are very good policies.” In his opinion, this makes the prospects for product innovation in the derivatives areas “bright” in Singapore.