Philippine stock exchange’s tech glitches may dent foreign investor confidence

The Philippine Stock Exchange, Inc. (PSE) is being urged to invest more in advanced infrastructure as technical glitches that affect trading may dent investor confidence, analysts said.

Trading was delayed by nearly two hours on Monday morning due to a “system connectivity issue,” the PSE said in an advisory.

The market opened at 11:10 a.m. instead of the usual 9:30 a.m.

The delay may have dampened trading in the stock market. The PSE’s main index closed Monday’s session down by 1.19% to 6,192.02, with all indices in the red.

Analysts said the local bourse operator should strengthen the trading infrastructure since technical disruptions have hit the stock market every year since 2022.

“Time is money in financial markets. This is why it’s important for the PSE to ensure that we have a reliable trading infrastructure that can support transactions during business hours,” Juan Paolo E. Colet, managing director at China Bank Capital Corp., said in a Viber message.

While there has been no significant impact, Mr. Colet said that “if we’re trying to make our market more attractive to investors, these glitches don’t help.”

Peter Louise D.C. Garnace, an equity research analyst at Unicapital Securities, Inc., said trading delays or suspensions arising from PSE’s connectivity problems “have serious implications for various stakeholders.”

“Trading delays may sow fear or panic among investors in the absence of an immediate disclosure from the local bourse regarding the issue,” he said in a Viber message.

Mr. Garnace noted how the market stayed in the red throughout the first half of Monday’s trading session.

He noted that trading volume is expected to be subdued as connectivity issues make it difficult for trading participants to execute trades efficiently.

Having such delays in market sessions affects the reputation of the PSE as these incidents “raise concerns about the reliability and integrity of its trading systems,” said Mr. Garnace.

“As delays and disruptions in the exchange’s operations can erode investor confidence, we believe the market operator must further strengthen its trading infrastructure and enhance transparency to reassure investors that the local bourse remains reliable,” he said.

Toby Allan C. Arce, head of sales trading at Globalinks Securities and Stocks, Inc., said foreign investors might raise concerns about the PSE’s operational robustness amid these technical disruptions.

“Such incidents, if recurrent, could dent investor confidence, particularly among those who prioritize seamless trading environments,” he said via Viber.

Mr. Arce said the PSE could take proactive measures such as investing in “advanced, fail-safe infrastructure.” He said the PSE should also ensure it has redundant connectivity systems to prevent similar incidents, as well as maintain investor trust.

“Regular system audits, transparent communication during disruptions, and prompt resolution mechanisms can further reassure investors about PSE’s commitment to maintaining high standards of reliability,” Mr. Arce said.

“Additionally, the PSE could engage with stakeholders to provide clarity and updates, minimizing any negative sentiment stemming from such occurrences,” he said.

The PSE experienced a 40-minute delay during its pre-open period on Dec. 9, 2024.

There was also a cancellation of trading on Jan. 4, 2022 due to “technical problems encountered in establishing connection between the NASDQ trading engine and the Flextrade front-end system.”

In 2015, the PSE migrated to its new trading system, the PSEtrade XTS using NASDAQ’s X-stream Trading technology.

The PSEtrade XTS, which replaced its previous platform, is capable of handling large trading volumes and supporting future requirements, according to the company. – Sheldeen Joy Talavera, Reporter