Costly glitch at NSE goes beyond a ‘technical hitch’

The Standard

It is a matter of deep regret that what a top Nairobi Securities Exchange official termed “just a technical hitch” in the Automated Trading System (ATS) led to a full day suspension of trading at the bourse for the second time this month.

The fact that the estimated loss was around Sh500 million and Sh1 billion worth of equities and bonds respectively shows that the so-called technical hitch was worse than the bourse officials are willing to admit.

Earlier this month, ATS also run into serious technical errors that resulted in the halting of trading for close to three and a half hours. It is no consolation that NSE disruption is not an exception as technical hitches hit some of the more prominent stock markets around the world. On November 26, 2009, for example, the London Stock Exchange (LSE) ground to a halt for several hours following a technical glitch that affected its electronic platform.

That was also the second time the LSE experienced problems because in September 2008, at the height of the global financial crisis, the bourse experienced a technical hitch that suspended trading for seven hours.

And on August 22, this year, trading in United States of America shares ground to a halt after a technological problem shut down trading in the National Association of Securities Dealer Automated Quotation system (NASDAQ) securities.

The NSE should refuse to be consoled because it is at the heart of the country’s ambition to become a financial hub for international securities trading and its detractors are looking for excuses to abort the dream. It should not be lost on anyone that, for some inexplicable reason, the West judges Kenya more harshly than, not just its neighbours, but other states in Africa.

What is clear, however, is that Kenya cannot afford any hiccups on the way to becoming a middle-level economy. The NSE should, therefore, take the opportunity afforded by its planned upgrade to build redundancy into the entire system. This would ensure that a technical hitch does not lead to a suspension of trading, particularly after it introduces the expected new products such as the Growth Enterprise Market Segment.