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Is SGX’s credibility threatened post the major outage?

The SGX stock markets opened normally today following yesterday’s major outage that caused trading to be suspended for more than half a day.

Yesterday, various media picked up the news and reported on the incident while panicked traders and investors tried to make calls in mitigating further risks. This is the fifth time in two years that SGX had to suspend trading, and it caused frustration among some traders and investors, raising concerns about the market’s reputation.

Marketing asked industry players as to whether such technical glitches tarnish its reputation and image SGX as a leading exchange hub in Asia especially as it is in the midst of a deal with Baltic Exchange?

CEO of Consulus Lawrence Chong said as a stock exchange of an international financial centre, this is unacceptable and MAS (Monetary Authority of Singapore) has already in the past made its point very clear to SGX.

“In short, technical glitches cause seismic damage to the SGX brand because an exchange must be able to ensure that trades will get done on time and things will work. Furthermore, with the government’s push into the Smart Nation and Fintech initiatives, this is just embarrassing,” he said.

While globally SGX is not alone in suffering from technical glitches, it comes at a bad time for SGX as a business as its attempts to is in talks with Baltic Exchange, known to be a  global shipping market hub and diversify its revenue sources.

According to an earlier report on Today, SGX could potentially be facing potential competition for the Baltic Exchange from other major exchanges such as Chicago-based CME Group and Atlanta-based ICE.

”You can say that the problem seems systemic as the last technical glitch was just a year ago. But whatever the cost is to fix it, it will certainly be negligible when you compare it to the reputation of Singapore and SGX,” Chong added.

Meanwhile Ryan Lim who is principal consultant and founding partner at QED consulting said for now, he doesn’t foresee Thursday’s incident to have a huge impact on the overall investor and market sentiment.

“The retail investors are driven by sentiment and hence it will likely affect SGX’s branding as a financial hub,” he said. However they are not the biggest players in the space. Lim added that for major institutional investors the fundamental on transactions is of more importance than Singapore stock market’s image.

Lim added there would be investors losing money due to the glitches, but it is still too early to tell whether it will really shake the confidence of the investors in a big way. It depends on whether more such cases occur in the future.

Redhill’s partner, Jacob Joseph Puthenparambil, did not think so. He said the incident will not likely affect the image and branding of the Singapore exchange as people “invest because of the SGX-listed companies and their performance, not because it’s SGX” itself. However he added that the exchange shouldn’t take lightly on the series of glitches and should investigate to prevent similar cases in future.

Chong added, “SGX has to demonstrate serious institutional commitment about fixing the problem quickly appoint a panel of experts to investigate the problem, appoint a global IT vendor to fix the issue, present processes and guarantees to the market about how it will prevent such incidents from happening again.”

If not, he warned, the government might have to step in as this has a “detrimental impact on our standing as a global financial centre.”

The SGX is regulated by the MAS and has international presence with sites available in cities like London, Beijing, Shanghai, Tokyo, Hong Kong and Mumbai. The exchange is also recognised as a clearinghouse in both the European and US markets.

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