Taking Heed

SGX to Invest S$20M in Infrastructure Upgrades Following Outages

In response to two serious outages last year, SGX has made clear that it plans to take heed of the

In a press release today, the Singapore Stock Exchange (SGX) reacted to a Board Committee of Inquiry’s findings and recommendations following two serious outages late last year. Accordingly, the Singaporean exchange plans to invest S$20 million to upgrade its technology infrastructure, halt fee hikes and contribute S$1 million to an Investor Education Fund.

Outages

Last year, the SGX endured two serious outages, leaving regulators and investors alike with a feeling of discontent.

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Last year, the highly sophisticated and tightly regulated SGX endured two serious outages, leaving regulators and investors alike with a feeling of discontent.

A power supply failure was the culprit for the first outage, which led to a halt in trading for an excruciating 144 minutes in early November. Then in late December, bad fortunes again befell Southeast Asia’s biggest exchange when a software error led to the delayed opening of trading by 3½ hours.

Following the event, the SGX Board appointed a Board Committee of Inquiry (BCOI). The committee was tasked with investigating the facts and circumstances leading to the breakdowns, and with making appropriate recommendations for improvements to prevent similar future recurrences and to enhance crisis management procedures.

Reprimands

After the second glitch, the local financial regulator and central bank, the Monetary Authority of Singapore (MAS), warned the city-state’s stock exchange that it may face monetary penalties should operating problems persist.

Financial institutions have the responsibility to ensure the resilience of their technological systems.

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In a statement, MAS Deputy Managing Director of Financial Supervision, Mr. Ong Chong Tee, said, “Financial institutions have the responsibility to ensure the resilience of their technological systems…They should effectively manage their technology risks and ensure prompt recovery when incidents arise so as to minimise service disruption to customers.”

Remedial Measures

Changes are afoot. This month saw veteran banker, Loh Boon Chye, named SGX’s new chief executive. He is expected to reverse the fortunes of the exchange as it grapples with falling trading volume.

And with the response to the BCOI’s findings and recommendations today, SGX has made clear that it plans to take heed of the lessons contained therein, announcing a suite of actions.

Specifically, SGX plans to address the underlying technology issues that initially brought the exchange into disrepute. By investing SG$20 million to upgrade its infrastructure, SGX hopes to further improve the robustness of its systems and recovery processes.

If the lessons can be realised, the announced investment could serve to strengthen SGX’s capabilities and market position.

In line with MAS’ directive, SGX said that it “will also implement a moratorium on any increase to securities and derivatives market fees. This moratorium will only be lifted when SGX has satisfied MAS that it has met its obligations,” that is, until improvements have been completed.

Finally, “SGX will also contribute S$1 million to the Investor Education Fund, which is used to fund educational programmes approved by the Investor Education Committee, which includes industry practitioners.”

Indeed, SGX needs to act to secure its position as the largest operator in Southeast Asia. The glitches haven’t helped the exchange at a time when competition for the biggest financial center in Asia is rising: The Hong Kong – Shanghai stock connect has enabled access to the lucrative Chinese equities market for international investors. If the lessons can be realised, the announced investment could serve to stregthen SGX’s capabilities and market position.

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