MAS takes SGX to task, orders bourse to improve infrastructure
Singapore Exchange at Shenton Way. TODAY file photo
SINGAPORE — The Singapore Exchange (SGX) will have to pony up an estimated S$20 million to address gaps in its service recovery capabilities, which were laid bare after two market outages late last year, one of which brought trading on the local bourse to a halt for hours.
And until these remedial measures are implemented to the satisfaction of a third-party expert and MAS, the SGX will not be able to raise fees for the securities and derivatives market, with immediate effect.
Announcing this today (June 24), the Monetary Authority of Singapore (MAS) took the SGX to task, saying that while it has met its primary obligation to maintain fair, orderly and transparent markets, it had fallen below service recovery standards in both cases.
Following the discussions with the MAS on the incidents, SGX also decided to contribute S$1 million to its Investor Education Fund, the authority said.
The remedial actions to be undertaken by SGX are strengthening its monitoring system capabilities and disaster recovery procedures and improving on crisis communication processes. “MAS will monitor closely SGX’s implementation of the remedial measures, which SGX has estimated would cost about S$20 million to carry out,” it said.
Responding to media queries, SGX said it “accepts the MAS’ reprimand” and the moratorium on fee increases. “(We) recognise the impact this incident has had on our reputation,” the local bourse said.
It added: “SGX expects to complete its obligations under the MAS directive by the end of 2015. The completion of SGX’s obligations will be validated by an independent third party, and confirmed by MAS before the moratorium is lifted.”
The two outages last year took place on November 5 and December 3. The Nov 5 outage was caused by a disruption in power supply, leading to SGX declaring a formal trading halt at 2.51pm that day. The securities trading platform reopened more than two hours later, while the derivatives market reopened at 7pm. The incident prompted the board of directors from SGX to set up a Board Committee of Inquiry to independently oversee investigations.
The Dec 3 outage occurred due to errors in reports generated by SGX’s client accounting system, causing the stockmarket to delay opening at normal trading hours.
Commenting on the Nov 5 incident, the MAS said it accepted the assessment of the SGX Board Committee of Inquiry that SGX had taken reasonable steps as a market operator to ensure that its power system was resilient. But the local bourse’s service recovery methods required improvements.
For example, SGX was unable to recover some of its critical systems within four hours, the goal set out in the MAS Notice on Technology Risk Management. SGX’s monitoring systems were also unable to identify problems quickly in order for prompt action to be taken.
Following the two incidents, several brokers set up an online petition calling for the resignation of SGX’s Chief Executive Officer Magnus Bocker.
Earlier this month, SGX announced the appointment of Mr Loh Boon Chye as the new CEO from July 14, taking over from Mr Bocker who will step down after his contract ends on June 30. SGX president Mr Muthukrishnan Ramaswami will be in charge during the interim.
