Singapore Exchange Ltd. Chief Executive Officer Loh Boon Chye apologized for a technical malfunction that angered traders, promising to do better and saying the company will be accountable for Thursday’s five-hour halt that attracted a rebuke from the city-state’s central bank.

The Monetary Authority of Singapore said it will review SGX’s investigation findings before deciding on “appropriate supervisory actions.” The exchange has the responsibility to ensure that its system and recovery processes are robust, and the central bank takes a serious view over the market disruption, an MAS spokesman said.

Loh expressed his remorse on a Friday media call that left unanswered questions about the exact cause of the disruption that shut trading early the previous day. Southeast Asia’s biggest bourse reopened at the regular 9 a.m. start on Friday, after halting stock trading at 11:38 a.m. on Thursday. It failed to follow through on two pledges to reopen during the afternoon.

“I wish to sincerely apologize on behalf of all at SGX for the many inconveniences I’m aware that we’ve caused,” Loh said on the call. “We’re not pleased with our own recovery time and it needs to be better. We’ll do better.”

Loh refrained from giving detailed answers on the root cause of the disruption, saying only it was triggered by hardware and wasn’t a capacity issue. The company will by next week provide details of its investigation, including on the cause of the disruption, Loh said in a statement.

The benchmark Straits Times Index climbed 0.6 percent at the close on Friday, tracking gains in Asian stocks. Shares of the exchange operator fell 0.6 percent.

Loh, whose one-year anniversary as CEO was Thursday, replaced Magnus Bocker just a few months after the Swede was forced into a public apology in the wake of two trading disruptions in the space of a month. Those mishaps led to a reprimand from the Monetary Authority of Singapore. The latest breakdown was at least the third malfunction at the exchange operator in the past year, after a near two-hour disruption in derivatives trading in August and a one-hour halt in October.

“All organizations have occasional technical glitches, the SGX is no different,” said Stefanie Yuen Thio, joint managing director at TSMP Law Corp. “The SGX has more pressing challenges to face -- namely depressed trading prices and a stream of privatizations. Our exchange needs to revive the market.”

While Loh said trades were reconciled before the stock market opened, some traders said they were still tallying their Thursday orders. SGX will devote “all necessary resources” and review the disruption, he said.

“We’ve escalated our case to see if SGX can reverse some positions,” said Wong Kok Fai, a trader in Singapore with Azurewing Asset Management. “It could be a difference on our profit and loss. We’re badly affected, one minute means a lot to a high-frequency trader and it took SGX 30 minutes before it communicated there was something wrong.”

SGX said it will waive the penalty for short-sellers who failed to close their positions due to Thursday’s disruption.

“People are still going through the indigestion of yesterday,” said Nicholas Teo, a trading strategist at KGI Fraser Securities Pte in Singapore. “Some back offices worked through the night, and I’m sure SGX did as well.”

MAS said Thursday that it was closely monitoring the situation. The malfunction exceeded the regulator’s acceptable maximum unscheduled downtime for financial institutions of four hours in any 12-month period.

Unhappy Traders

The exchange hosted at least three calls during Thursday afternoon, one of which involved raised voices from some participants, according to two people who asked not to be named because the talks were private. About five minutes before the scheduled 4 p.m. start, brokers demanded SGX cancel the reopen because they were worried about a disorderly market, said the people. One of the issues was that different parties were seeing different data.

The events left some market participants confused and unhappy. One trader at a Singapore-based firm said they had positions they couldn’t exit because of the abrupt close. The trader, who asked not to be named so as not to jeopardize relationships with SGX, said they were having problems with their orders as early as 10 a.m.

Singapore is home to Southeast Asia’s largest stock market, with total capitalization in the city of $494 billion, according to data compiled by Bloomberg. About S$1.6 billion ($1.2 billion) of shares changed hands on an average day in the past 12 months. The exchange maintains a monopoly on stock trading.

SGX isn’t alone in suffering from technical errors. Malfunctions at Deutsche Boerse AG, Europe’s biggest derivatives exchange, disrupted trading in February and July 2015, while there was a one-hour halt in trading on Euronext NV’s derivatives products in March last year. The New York Stock Exchange had an outage a year ago that lasted 3 1/2 hours.

“The challenges in reconciling the missing and duplicate messages resulted in a longer process than anticipated,” Loh said on the call. “The primary question we ask ourselves at each turn and decision is to check that we’re operating a fair, orderly and transparent market.”

Source:
courtesy of BLOOMBERG

by Andrea Tan and Kana Nishizawa

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