SINGAPORE (June 24): The Monetary Authority of Singapore (MAS) has directed Singapore Exchange to invest $20 million to strengthen its systems as part of measures to address technological failures that halted trading twice last year.

The regulator, which also barred SGX from raising its fees until it resolved the issues to MAS’ satisfaction, said in a press statement that SGX did not have sufficient monitoring capabilities to meet contingencies.

“Financial institutions have the responsibility to ensure the resilience of their technological systems. They should effectively manage their technology risks and ensure prompt recovery when incidents arise so as to minimise service disruption to customers,” says Ong Chong Tee, MAS’s deputy managing director for financial supervision.

“MAS takes a serious view of the incidents and will require SGX to improve its technology risk management,” Ong adds.

SGX estimated that it would cost $20 million to upgrade its monitoring systems to identify problems quickly in order for prompt remedial actions to be taken, MAS said.

It also directed SGX to strengthen its business continuity management and disaster recovery procedures to improve crisis preparedness and improve its crisis communications processes to provide prompt information to all stakeholders.

These are recommendations made by the SGX Board Committee of Inquiry (BCOI) which investigated the trading glitches and reported to the regulator.

In addition, the exchange will contribute $1 million to the Investor Education Fund to fund programmes approved by the Investor Education Committee which includes industry practitioners.

“Until the measures are verified by an independent expert and MAS is satisfied with the completion of these measures, SGX will not increase fees for the securities and derivatives markets,” MAS says.

A failure in the exchange's backup power supply halted trade in stocks and derivatives for around three hours on Nov 5.

A month later, on Dec 3, a faulty software update resulted in a three-and-a-half-hour delay to the start of stock market trading.

MAS said that while SGX has met its primary obligation as an exchange to maintain fair, orderly and transparent markets, it has fallen below service recovery standards on both incidents.

SGX chairman Chew Choon Seng said that SGX accepted MAS’s reprimand and directives to address the issues and implement the BCOI’s recommendations.

”The board will track progress on the BCOI’s recommendations on a quarterly basis,” he says. Chew was speaking at a press briefing on BCOI’s findings and recommendations.

SGX closed 6 cents higher today at $7.84.