SGX given 6-point action plan for market outages

A securities industry working group convened after a July 2016 market outage is recommending that the Singapore Exchange (SGX) adopt clearer continuity plans and maintain closer coordination with the industry and service providers.

The working group drew up half a dozen recommendations, which the regulator, the Monetary Authority of Singapore (MAS), has accepted; it has directed the SGX to implement them within two years.

SGX said it has done so for three of them, namely, to establish a master record of data, provide clarity on the timing and principles of market closure and resumption and to adopt a protocol for assuming trades.

Implementing all six recommendations may take 18 to 24 months, it said.

MAS has lifted a moratorium against fee increases by SGX for its securities and derivatives markets, citing SGX's independently verified completion of improvements related to two 2014 outages.

The industry group, whose 14 members were drawn from broking houses, the investment community, software vendors, independent experts and SGX, was tasked last September with assessing and recommending ways to improve the resilience of Singapore's securities market.

It recommended that SGX:

1. Maintain a master record of all trade data with a clear hierarchy based on the source of the data, and make uncorrupted data available to broking houses during an outage;

2. Establish industry trade management and recovery standards, to which brokers must adhere, by the first half of this year;

3. Keep markets open whenever possible, but that it should establish clearer guidelines on when to close and reopen markets;

4. Spell out clear principles which are to be followed if trades are to be assumed, given that trades affected by ambiguities during a disruption are normally cancelled;

5. Improve communication to brokers as well as brokers' designated technical vendors during a market disruption; and

6. Widen the scope and reach of continuity tests.

SGX said it has implemented Recommendations 1, 3 and 4, that is, those on data corruption, market closure and resumption, and on trade assumption - with immediate effect.

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It is forming an executive steering group comprising SGX and broker members, assisted by technical and non-technical working groups, to look into the remaining three.

SGX experienced three major outages between 2014 and 2016, leading MAS to impose the fee moratorium and to direct it to find ways to improve its operational readiness.

In a statement on Monday, MAS deputy managing director for financial supervision Ong Chong Tee said: "MAS takes a serious view of trading disruptions. Technology system-related breakdowns can never be zero-probability occurrences, and this is why SGX should strengthen its recovery process. Both SGX and brokerage firms have a shared responsibility to establish clear processes for timely recovery of our securities market in the event of an incident."

The industry working group was formed after glitches in SGX's primary server for its trade engine, together with the problems in trying to reconcile error trades, led to a shut-down of the Singapore stock market for all but 21/2 hours on July 14, 2016.

Led by DBS Group Holdings board member and Fullerton Fund Management chairman Ho Tian Yee, the industry group was formed by SGX in consultation with MAS to improve the resilience of the market.

Read also: Quest for livelier market drives SGX to reverse, tweak some rules

This article was first published on March 21, 2017.
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