MAS Reprimands SGX For Market Outages

The Monetary Authority of Singapore (MAS) has reprimanded the Singapore Exchange (SGX) for lapses related to the market outages on 5 November and 3 December 2014 and directed SGX to improve its recovery capabilities and processes.

There will be a moratorium on fee increases for the securities and derivatives markets with immediate effect until the improvements are completed. Following the discussion with MAS on the incidents, SGX has also decided to contribute $1 million to its Investor Education Fund.

MAS determined 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.

5 November 2014 outage:

MAS accepts the assessment of the SGX Board Committee of Inquiry that SGX had taken reasonable steps as a market operator to ensure that its power system was resilient.  However, MAS is of the view that SGX’s service recovery requires improvements. First, SGX did not recover some of its critical systems within the four hour recovery time objective set out in the MAS Notice on Technology Risk Management. Second, SGX’s monitoring systems were not able to identify problems quickly in order for prompt remedial actions to be taken. MAS has assessed that SGX did not have sufficient monitoring capabilities to meet contingencies.

MAS notes that remedial actions have since been taken to address the immediate root causes of the power outage. To improve service recovery, MAS has directed SGX to take the following actions:

i.   strengthen its monitoring system capabilities to allow timely and accurate problem identification when incidents occur; ii.  strengthen its business continuity management and disaster recovery procedures to improve crisis preparedness; iii. improve its crisis communications processes to provide prompt information to all stakeholders.

MAS will monitor closely SGX’s implementation of the remedial measures, which SGX has estimated would cost about S$20 million to carry out. 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.

3 December 2014 outage:

The delayed market opening on 3 December 2014 was due to errors in reports generated by SGX’s client accounting system. The errors were caused by technical changes performed during the weekend before the incident. The root cause of this incident was not related to that of the 5 November 2014 outage.

While SGX had adhered to the change procedure provided by the vendor, MAS has assessed that the time taken to escalate and troubleshoot the errors fell short of expectations. MAS has directed SGX to improve its service recovery and how it implements technical changes.

Mr Ong Chong Tee, Deputy Managing Director, Financial Supervision, MAS, said, “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. MAS takes a serious view of the incidents and will require SGX to improve its technology risk management.”


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