Thoughts on the recent SGX Glitch

Courtesy of LA Times

As you folks may have noticed, if not this post is just to highlight the incidents of it.

SGX had a glitch on the exchange today and went down.

Details are on many news websites such as here, including SGX own alerts.

It is good to know that exchanges do go down on various reasons, be it technical issues or just circuit breakers that prevent us from queuing our favourite stocks at great prices or taking some profits off the table to lock them in.

Some events:

• 2014 SGX trading disruptions
• Mirus Futures Zen-Fire datafeed going down during trading hours or producing weird data during live trading (I heard the programmers mass quit, the guys remaining couldn't fix it well enough)
• NYSE having a halt due to malfunction (you can read it here)
• China's circuit breakers, late last year to early this year
• More past events here too

As you know these are electronic exchanges (don't have pit trading anymore), I believe despite the best efforts, there will still be downtimes (sadly). We can't predict any of it, just like fishing for market tops nor bottoms.

Instead, I feel we should be more proactive by taking measures, such as preparing for a down market.

Some ideas such as:

• For my case where my datafeed went down, I looked for alternative datafeeds and/or brokers (Optimus Futures with Rithmic), for SGX, I have two SGX brokerage accounts just in case, excluding my SCB account. My US account with Thinkorswim, I can transfer the counters to other brokerages.
• Prudent portfolio management. How active is your portfolio turnover? Those companies you are holding, are they speculative in nature? Or more resilient that you have the conviction to hold for a period of time and not worry everyday by checking prices.
• Prudent money management. For speculative positions, or even open trades, stop losses, be it in form of TA or FA, should be limited to a small portion of your account, maybe something like a maximum possible of drawdown of 2% per trade and a maximum of 6% drawdown of your total equity (yes, including margins, fees and slippage). One may say gap downs or up, will shoot past your stops but I would say a roof with a hole is better than no roof at all.
• Understand the history and nature of the market/exchange. Is it a one time fluke? Does this exchange have loads of outages? Or the market is going crazy? When in doubt, do not attempt to trade or sell until you are comfortable. No point having a surging market that you cannot take profits from, or one that causes ridiculous amount of slippage that turns a winner into a loser. Worse, making mistakes and not being able to get out at all.

How do you guys feel about the recent SGX outage?