Singapore seeks to roll out market circuit breakers

Singapore Exchange has become the latest bourse to embrace systems aimed at stopping wild price swings often associated with electronic trading, saying it plans to implement "circuit breakers" by the end of the year.

The move, subject to an industry consultation, would bring the Asian bourse in line with ASX, the Australian exchange, and most markets in Europe and the US, where regulators have pushed for circuit breakers as a way of avoiding a repeat of the "flash crash" that hit Wall Street in 2010.

That saw the prices of shares in the Dow Jones Industrial Average index plunge in minutes after a malfunctioning algorithm triggered repeated sell orders.

Such incidents have been rare in Asia, although the National Stock Exchange of India was in October last year forced to halt trading briefly after 59 erroneous orders from a basket of trades caused the so-called "Nifty" index to drop as much as 15.6 per cent within minutes.

The Singapore Exchange said its proposed circuit breaker would kick in if a share price moved up or down by 10 per cent. That would be followed by a five minute "cooling off period", during which market participants could still trade within the price band.

Once the cooling-off period ended, the price band would be "adjusted to reflect changes in the price of the share", the exchange said. It is consulting the market on the range of instruments and markets to which circuit breakers will apply, it added.

The model for the circuit breaker is the result of changes made since the results of an initial market consultation that started in 2011.

However the circuit breakers that are being introduced in the US have come under fire from various industry groups who have argued that they are exacerbating volatility rather than calming the market. Companies such as Anadarko Petroleum, American Electric Power and NextEra Energy have seen wild swings in their share prices as the New York Stock Exchange implemented the new SEC-mandated guidelines, known as limit-up, limit-down.

In a separate move, the group said it had appointed Nico Torchetti from HSBC as the new head of its post trade services business.

Mr Torchetti will be responsible for the group's push into services such as clearing and settlement and will be responsible for building SGX's central depository. He will report to Muthukrishan Ramaswami, SGX president, and begin his role on August 1.

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