What causes frequent trading disruptions at DSE

Infographic: TBS

With no backup server, the Dhaka Stock Exchange (DSE) had to halt trading for more than three hours when its sole main server crashed on 24 October.

The country's main bourse is running its huge operation with only one data centre. The trading could have resumed within a maximum of five minutes of the crash if there was a backup server – secondary hardware that has the same configuration and function as that of the main server.

The DSE continues to use an outdated server instead of replacing it with an upgraded version, leading to frequent server downtimes owing to different technical glitches.

The stock exchange procured 120 Dell servers with very high configuration for Tk20 crore, but it has not installed those in a year, according to sources at the DSE.

Moreover, Shenzhen Stock Exchange had offered its platforms – matching engine and surveillance system free of cost for 10 years. Yet, the DSE has not responded to the offer.

The Chinese consortium of Shenzhen Stock Exchange and Shanghai Stock Exchange joined the DSE as the strategic partner in 2018, on the condition of providing technical assistance worth $37 million.

At present, the DSE is using Nasdaq's matching engine and surveillance suite from the software vendor Trapets. The services, for which the bourse pays Tk7 crore annually, will see their contracts expire in 2024, according to DSE sources.

The DSE could have saved the money by accepting Shenzhen Stock Exchange's offer. To enjoy Shenzhen's free of cost services, it will take two years to complete necessary installation. So, the DSE should have started the process by September 2022.

The Dhaka bourse also has no concrete plan yet about what it will do after its contracts with Nasdaq and Trapets expire, which lays bare how vulnerable DSE's IT infrastructure is that puts investors at risk and causes financial losses for the government as well.

Shaikh Shamsuddin Ahmed, member of the BSEC, told TBS that the chief technical officer (CTO) of the DSE was asked to explain the frequent outages of the trading but he did not provide any answer. That's why the BSEC formed an inquiry committee to look into the recent trading disruptions, he said.

An ex-director of the DSE board, on condition of anonymity, said the failure to set up the new hardware and implement the technical assistance offer from the Chinese consortium was the failure of the management.

When contacted, Ziaul Karim, who was sent on forced leave by the DSE, said trading disruption was due to technical glitches of Nasdaq. "Nasdaq has already been sent a letter in this regard," he said.

About the data centre, he said, "We have been trying to set up a backup server since 2016, but the board approved it in 2021. Its work is ongoing."

He said a discussion on Shenzen's offer is going on.

The three-hour trading interruption on 24  October brought down the daily turnover at the DSE  to Tk334 crore from the daily average of Tk1,000 crore. The DSE gets Tk0.25 per trade value of Tk1000 and the government gets Tk0.50.

As the trading disruption lost Tk700 crore in turnover. The monetary losses apart, the trading halt also hurt the DSE's global reputation.

The DSE faced trading disruptions for the second time in less than a week for its technical glitch on 30 October, causing a delay in the opening of trading session for 1.5 hours.

However, the DSE in a notice explained that the disruption was not because of technical glitch, but it was human error in putting instructions of the circuit breaker over 70 stocks.

Tarique Amin Bhuiyan, former managing director of the DSE, who resigned a month back over disagreement with the IT division, served a show-cause notice to the chief technology officer and general manager, ICT over irregularities in IT investment.

The eight-page notice obtained by The Business Standard that he served in August just before his resignation describes how corruption of a section of IT officials left the DSE vulnerable with poor IT infrastructure.

In his show-cause letter, he questioned why the ICT division was favouring one particular vendor, OneWorld InfoTech, in many DSE technology investments that include the Data Centre Tower project itself.

However, the issues regarding irregularities in procuring hardware and software, delay in implementation of IT projects and DSE Tower Data Centre projects that were raised in the show-cause notice were not taken into consideration by the board.

Instead, the show-cause notice was taken to the appeal board and was dismissed after the MD's resignation, according to the DSE sources.

The DSE has been running without an MD for the last one month after the resignation of Tarique.

Chairman of the DSE board Md Eunusur Rahman said he had been informed about the show-cause notice, but he was not well aware of the issues raised in the show-cause notice, which were not taken into consideration.

"I also heard that the show-cause notice was presented before the appeal board, but I do not know the update," he said.

He said the chief technology officer was served a show-cause notice for frequent disruptions in the DSE server.

About frequent trading disruptions, he said, "As explained by the IT department, the last disruption was for human error but we are not sure about it."

"We will know about this after receiving their reply, and the previous issues raised by the former MD in show-cause notice will also be discussed," he added.

Meanwhile, the Bangladesh Security Exchange Commission (BSEC) on 31 October issued an order sending DSE's Chief Technology Officer Md Ziaul Karim on forced leave, following repeated trading disruptions in less than a week.

He will be on leave until the enquiry committee formed in this connection submits a report on the glitch that halted DSE trading on 24 October and 30 October.

DSE Demutualisation Act 2013 only empowered the regulator to order any of the entities under its purview to do something for the sake of achieving the goals of the Act. But the BSEC itself ordered the forced leave of the chief technology officer.

How a syndicate of IT section makes DSE vulnerable

The DSE's ICT division favoured a particular vendor OneWorld InfoTech (OWI) while awarding work orders of all technology investments, including implementation of IT projects.

In his show-cause notice, Tarique Amin said this was very dangerous for a company to depend on one vendor for all technology platforms because if the particular vendor suddenly ceases to exist, the DSE will have nowhere to go.

He also said, "There are reasons and best practices as to why in most cases the chief information security officer of a company does not report to the chief information/technology officer. Similarly, it is also a best practice not to give maintenance and support of both production data centres and all cybersecurity solutions to the same vendor since when that vendor is compromised or has ill intentions or suddenly ceases to exist, the company may not have anywhere to go.

"We have already created a very high-risk predicament for the DSE with our previous [not very well thought of] decisions by awarding our main data centre establishment, support and almost all of our cybersecurity solutions to OWI."

Delay in completing data centre tower

Chittagong Stock Exchange, Central Depository Bangladesh Limited and all banks have backup servers, but the DSE is running with only one data centre.

The DSE invested Tk150 crore for establishing the main data centre after shifting its office to DST tower in Nikunja, but the data centre project already saw its deadline extend two times.

The chief technology officer is the chairman of the steering committee of the data centre project.

At present, the DSE is using its old data centre in Motijheel. It also took an initiative to establish a second data backup server on the fourth floor of Abdul Monem tower in Dhaka city, but it could not start work yet.

However, the DSE has been paying Tk4.5 lakh as rent for the floor in the tower for several months, according to DSE sources.