Singapore Exchange's securities market reopens after disruption

[July 15, 2016]  By Aradhana Aravindan and Marius Zaharia

SINGAPORE (Reuters) - Trading in the Singapore securities market resumed on Friday after the fourth major interruption on the exchange in the past two years, piling pressure on CEO Loh Boon Chye as he tries to rejuvenate a bourse facing stiff competition in the region.

The Singapore Exchange Ltd <SGXL.SI> said securities trading was suspended just before midday on Thursday due to duplicate trade confirmation messages being generated. After having to delay planned resumptions twice, the exchange closed the market for the day.

Singapore's central bank said it took a serious view of the closure and would decide on regulatory action after the bourse had submitted its investigation report.

In a conference call with the media on Friday, Loh said the disruption was caused by a hardware issue, but gave few additional details and declined to say if any individual or department will be held accountable.

"It was triggered by hardware ... and we are focused on reviewing ... any gaps there may be in our recovery process," said Loh, who completed his first year at the bourse on Thursday.

The amount of short selling - by which an investor borrows a security and sells it in the hope that it can buy it back at a lower price - which could have caused losses for investors was "insignificant", he said. The bourse will waive buy-in penalties for short-sellers who were unable to cover their positions on time due to Thursday's market outage.

SGX shares fell 0.6 percent, underperforming the Straits Times Index <.STI>, which was up 0.6 percent.

The latest interruption adds to challenges faced by Chief Executive Loh, as the SGX battles lackluster securities trading volumes and tries to improve scrutiny on trading activities following a penny stock crash in 2013.

"It's obviously a dent to their reputation," said OCBC head of research Carmen Lee.

The exchange said challenges in reconciling the missing and duplicate messages resulted in a longer process than expected.

"We sincerely apologize for the market disruption. Our recovery time has to be better and we must minimize downtime for market participants," Loh said.

Loh later said in a statement that SGX would update with more details, including the cause, by next week.

A Singapore Exchange logo sits outside their head office in Singapore April 22, 2015. REUTERS/Edgar Su/File Photo

While Singapore is Asia's leading venue for foreign exchange trading and has grown as a derivatives center, the average daily value of shares traded on its exchange is less than the Thai bourse's and trails far behind rivals in Hong Kong and Tokyo.

TECH ISSUES

The SGX has suffered technical troubles in the past, including in August last year, when trading on the derivatives market was temporarily suspended.

The exchange was hit by two disruptions in 2014, caused by a software error and a power failure, which led to a rebuke by the Monetary Authority of Singapore - the city state's central bank and SGX's regulator.

Loh named Nasdaq <NDAQ.O> as its "technology partner for many years".

As part of its efforts to boost revenue streams, the SGX is in exclusive talks to buy London's Baltic Exchange.

"Perhaps the exchange should refocus on its local operations and put on hold any bids for expensive foreign bourses," said Mano Sabnani, former DBS Bank managing director and former CEO and editor in chief of local newspaper Today.

"Management should also be held accountable for the embarrassing stoppages."

(Additional reporting by Saeed Azhar and Jongwoo Cheon; Editing by Shri Navaratnam and Sam Holmes)

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