The Market Monitor Minding the Nation's Business
By Luis Leoncio
Another technical glitch marred operations at the Philippine Stock Exchange (PSE) last week and raised fresh jitters in the local bourse, as this was the fourth time the PSE halted operations since migrating to a new trading system.
Local brokers were dumbfounded as they were greeted by a one-hour trading delay at the start of the trading day on September 30, setting off fears that the on-off technical glitches could worsen the withdrawal of foreign funds from the market.
Since August, the PSE has had six glitches: the worst occurred on August 25, halting trading for five hours. Making matters worse, brokers said, is the lack of transparency from PSE officials on what is really ailing the new trading system.
Net foreign selling, or the amount of foreign funds outflow, as against the inflow, has ranged from P300 million to P500 million, making local brokers nervous about the state of affairs of the market.
Market insiders are now questioning the reliability of the supposedly advanced Nasdaq OMX’s technology, which the PSE migrated to.
The PSE said the latest glitch that occurred on September 30 and delayed the opening of the trading day was “due to the unavailability of a set of broker information in the database needed to run front-end trading terminals. “
It said it identified the database problem during its regular preparatory activity before the start of the trading day.
“The day’s schedule was pushed back to give time to restore broker information in the database for both onsite and offsite trading participants and to conduct standard validation procedures,” the PSE added in a statement.
The pre-open period started at 10:20 a.m., while the market opened at 10:35 a.m.
Normal operations proceeded throughout the trading day following the resolution of the issue that caused the delay in the market opening.
“The trading schedule resumed normally, as well, with the market closing at 3:30 p.m. The PSE is taking the necessary steps to prevent a similar incident from happening in the future,” the statement said.
On August 26, trading was also halted for nearly an hour; it started minutes after the market recess at 12 noon as the PSE cited a technical glitch.
The PSE implemented a trading halt as of 1:46 p.m. on “technical issues,” the PSE said. It resumed trading at 2:30 p.m.
The bourse is currently the X-stream Trading platform that was bought from NYSE Euronext Technology SAS in 2010 to replace MakTrade, which the PSE has been using since 1993.
The previous bourse glitches prompted the resignation of the chief technology officer of the bourse in August.
The Securities and Exchange Commission (SEC) is also closely monitoring developments. It asked the local bourse to submit a “full and thorough report” on the technical glitches that halted market trading, resulting in several occasions of market trading being halted.
The August 25 glitch stopped trading for about five hours, the longest recorded trading halt in PSE history. It was traced to a technical glitch related to front-end data.
The trading was also halted the day before when Philippine stocks plunged 6.7 percent. It wiped out this year’s record gains as worries over the impact of China’s slowing economy sparked a fresh rout in Asian stocks.
Trading was halted also on August 18, due to an error in reference price data.
The PSE disclosed on Wednesday that its chief technology officer, Emmanuel Caintic, resigned effective September 1. No official reason was given for the resignation.
PSE President Hans Sicat, meanwhile, apologized to all stakeholders for the developments. He said the trading halt was “the right thing to do” to level the playing field for traders.
Sicat had explained that the disruption had nothing to do with the newly acquired core trading engine powered by Nasdaq, but occurred at the “middleware”—the software that sends information from the base engine to front-end trading terminals, resulting in slower transmission of information to some terminals.
SEC Chairman Teresita Herbosa said the commission directed the PSE trading participants to submit their RCBA (risk-based capital adequacy) reports computed as of August 24, “and from there, the SEC will review their RCBA compliance.”
RCBA requirements pertain to the minimum required liquid reserves to protect the firms, their investors, and customers, and the economy as a whole.
SEC said in a statement the RCBA requirements ensure that broker dealers have enough capital to sustain operating losses while maintaining a safe and efficient market.
Under the SEC, RCBA rules, broker dealers are required to compute daily their RCBA ratio and financial requirements and to submit monthly an RCBA report showing their compliance/ non-compliance with the RCBA ratio and other financial requirements under the RCBA rules.
“SEC, however, may require broker dealers to submit an RCBA report at any given time, in addition to the monthly RCBA report,” the statement read.