Published September 9, 2008
Technical fault hits KL derivatives trade
Half a day's trading lost; stock, bond markets unaffected
By PAULINE NG IN KUALA LUMPUR

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THE Malaysian stock exchange continues to be plagued by systems issues, its derivatives market losing half a day's trade yesterday after the bourse detected a technical problem in the morning.
The 'connectivity' glitch did not affect the exchange's equity or electronic bond trading systems, and was resolved before the second session, which appears to have proceeded smoothly. But the second bugbear comes a mere two months after a multi-hardware failure in the exchange's core trading system resulted in the loss of a whole day's securities trading, and is certain to lead to further questions on the integrity of its platforms.
'We encountered a system connectivity problem this morning between our derivatives trading engine and all the derivatives brokers' trading front end systems. After resolving the connectivity problem, the exchange then undertook steps to ensure data integrity. Our system is now ready for trading in the afternoon session,' Bursa Malaysia chief executive Yusli Mohamed Yusoff said in a statement before the second session.
Dealers said they suspected a mock trial run conducted over the weekend for the equity trading system might have affected the derivatives system.
'It's hell of a nuisance,' a dealer at a local stockbroking house fumed, pointing out the problem had arisen at the 'wrong' time. Because of the bailout in the US of mortgage lenders Freddie Mac and Fannie Mae over the weekend, regional markets had rallied strongly yesterday.
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'Those short can't cover their positions,' he told BT when contacted in the morning. Trading on the local bourse was dull, however, with the market ending only half a per cent higher.
Only a handful of products are traded on the derivatives market, the most popular being the KLCI futures contracts and crude palm oil (CPO) contracts. A new product, US$ denominated CPO contracts, was launched only a few days back.
Dealers described the volume of trade for the KLCI futures and CPO contracts as 'decent', the latter averaging 7,000 to 10,000 contracts a day, adding the system called Bursa Trade had been functioning fine since November 2006 when it was first used.
Although the equity and derivatives systems are separate, dealers said they are expected to be eventually merged, to allow trades to be executed from the same terminal rather than two separate ones. Mock tests continue to be held for the transfer of the equity market to Bursa Trade, but this next phase has encountered numerous problems and integration issues.
The exchange had previously said it is aiming to resolve this issue by November and to transfer equity trading to the new system.
Its chief information officer Yew Kim Keong had resigned after the July meltdown, which was exacerbated by the failure of the back-up system to kick in.
It is not clear what the precise cause of yesterday's problem is. In April, the NYSE Euronext and Bursa announced the introduction of an advanced direct market access platform for the local derivatives market based on technology provided by NYSE Euronext Advanced Trading Solutions.