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SGX Told To Enhance Recovery Processes Following Trading Disruption Last Year

Date 20/03/2017

The Monetary Authority of Singapore (MAS) has directed SGX to implement measures to enhance its recovery processes and operational resilience, following supervisory investigation into the trading disruption to the securities market on 14 July 2016. These measures include recommendations by the Industry Working Group (IWG), comprising SGX and industry stakeholders. SGX will contribute $1.5 million to co-fund the costs that may be incurred by brokerage firms to  implement the IWG measures.

2     MAS has determined that while SGX has met its primary obligation as an exchange to maintain fair, orderly and transparent markets, it did not restore the proper functioning of its critical system within four hours as required by MAS. MAS notes that SGX has taken steps since the incident to address the hardware and software errors which led to the trading disruption. SGX had also, in consultation with MAS, formed the IWG to study and make recommendations on SGX’s and industry participants’ processes to enhance the operational resiliency of the securities market.

3     The IWG comprised representatives from SGX, local and international members of SGX, the investment community, independent experts and a software vendor, and was assisted by an external consultant. Its report to MAS recommends improvements in the following areas:

    i. restoration of corrupt data; 
    ii. market recovery procedures;
    iii. market closure and resumption timelines;
    iv. trade assumption;
    v. incident communication; and
    vi. business continuity scenarios.

4     MAS has accepted the IWG’s recommendations and directed SGX to complete the implementation of these recommendations within 24 months. The implementation of these recommendations will involve changes to the systems and processes of both SGX and the brokerage firms.

5     Mr Ong Chong Tee, Deputy Managing Director, Financial Supervision, MAS, said, “MAS takes a serious view of trading disruptions. Technology system-related breakdowns can never be zero-probability occurences 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.”

Completion of Remedial Measures for the 2014 Trading Outages

6     Following the 5 November and 3 December 2014 trading outages, MAS required SGX to make improvements to address the lapses related to those outages. There was a moratorium on fee increases for SGX’s securities and derivatives markets until the improvements were completed. SGX has since provided verification from independent experts that the remedial measures have been completed. MAS accepts the independent experts’ reports. The fee moratorium that was previously imposed will therefore be lifted with immediate effect.

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Background

The IWG was chaired by Mr Ho Tian Yee, a Board Member of DBS Group Holdings and Chairman of Fullerton Fund Management Co. Ltd, and comprised representatives from SGX, Phillip Securities, CIMB Securities, CLSA Singapore, KGI Securities, Morgan Stanley Asia, Securities Investors Association (Singapore), Investment Management Association of Singapore, The Society of Remisiers (Singapore), FIS, PWC and C3S.