Treasuries trading system disrupted

By Kim Rahn

The trading of three-year treasury bonds was suspended for about two hours due to a suspected error in a trading system, according to the Korea Exchange (KRX), Friday.

While the bourse operators said no major damage to investors was reported, brokerage houses and investors doubt the stability of its trading systems because it was the fourth incident in eight months.

According to the KRX, the trading for the three-year Treasuries stopped at 9:19 a.m., right after the market opened. However, that for other Treasuries and bonds, including five-year and 10-year ones, were not affected.

The system was normalized and trading resumed at 11:10 a.m.

The KRX said that the incident was caused by a system malfunction resulting from an improper order from a brokerage house.

“A stock firm, which has obtained interim approval for bond trading, made an order for the Treasuries, and the trading system failed to recognize it properly and shut down,” Lee Kyu-yeon, executive director of the KRX’s Stock Market Division, said.

“It took time for us to check each trade one by one with dealers in order to minimize possible damage to them,” he said.

The turnover of three-year treasury bonds is around 800 billion won per day, according to the KRX.

It has, however, assured investors that they will not be exposed to any major damage.

“The treasury bond market in question is exclusively for institutional investors. They were able to continue trading normally over the counter,” another official said.

He said the trading for five-year Treasuries, of which the daily turnover is 3-4 trillion won, experienced no problems.

About whether investors can file compensation suits for any damages incurred, the official said it is too early to say, saying they are still investigating the exact cause.

This is not the first time that the Treasury trading system has gone down: on Feb. 13 in 2012, trading for five-year treasury bonds was suspended from 10 a.m. to 2:40 p.m., and that for 10-year ones, from 2:40 p.m. until the market closed.

Last year, the KRX had three incidents. On July 15, it had a malfunction in its computer system and transmitted the KOSPI index with a 15-minute delay for more than an hour. The next day, its overnight KOSPI 200 futures trading linked to the Chicago Mercantile Exchange and KOSPI 200 options trading linked to EUREX were suspended for about three hours due to a power supply cut. On Sept. 12, a system failure caused a delay in trading of 183 stocks for 55 minutes.

The KRX said it will adopt an upgraded trading system, Exture+, in March. Lee denied rumors that this incident was linked to the new system’s pilot operation, saying the malfunctioned system was different from Exture+.