The letter “HKEx’s large investor base not comparable with SGX’s” (April 16) indeed reflects the situation we see today. But there was a time when the exchanges of the two former British colonies were not that far off. Both started as exchanges owned by members under British laws and British models of stock exchanges. Singapore had our version of “Stock Connect” then with Malaysia.
Many reasons and circumstances have led to Hong Kong Exchange becoming much larger today. But to merely wring our hands and do nothing will not help Singapore Exchange (SGX) grow.
There are good reasons for many to have advocated the setting up of an independent regulatory authority. This on its own would not drive SGX’s growth, but coupled with other efforts, it would help in Singapore’s push to become Asia’s leading financial centre.
When Hong Kong set up the Securities Futures Commission as the stock exchange regulator in the late 1980s, it certainly ruffled the feathers of the Hong Kong broking fraternity. But before that, the broking members had owned the exchange, creating a conflict of interest. The members made their own rules. The by-laws were set to protect the brokers. As a profit-making enterprise, it should not have had the power to regulate itself in its own favour to protect its profits, instead of seeking strategic growth.
Would the Monetary Authority of Singapore (MAS) be willing to set up a separate governance or regulatory unit, independent of SGX?
In addition, instead of minor “touch-ups” such as smaller board lots, the minimum trading price policy and caution alerts, both the MAS and SGX need to employ “helicopter vision” and remove some of the limitations to SGX becoming a global exchange.
For example, in Singapore today we can have a company listed in Singapore from a foreign country and operating in Australian dollars, Malaysian ringgit or Hong Kong dollars. But the banks can deal only directly in Singapore dollars and US dollars. This makes an investor reluctant to invest in such counters, as the conversion fees the banks and brokers charge are expensive, and distort the real trading costs.
Another issue is the lack of a single stock options market. SGX has abandoned such efforts before because it is expensive running a new system, and it takes time for investors to warm up to a new instrument.
But in today’s global market, local options traders are turning to the US and Hong Kong, where such markets are available. Such trades create for the exchange much higher volume, because they are instruments fund managers use to hedge their positions. But would SGX be willing to put up with some short-term pain to modernise and give the investor more options? Herein lies a conflict.
Many reasons and circumstances have led to Hong Kong Exchange becoming much larger today. But to merely wring our hands and do nothing will not help Singapore Exchange (SGX) grow.
There are good reasons for many to have advocated the setting up of an independent regulatory authority. This on its own would not drive SGX’s growth, but coupled with other efforts, it would help in Singapore’s push to become Asia’s leading financial centre.
When Hong Kong set up the Securities Futures Commission as the stock exchange regulator in the late 1980s, it certainly ruffled the feathers of the Hong Kong broking fraternity. But before that, the broking members had owned the exchange, creating a conflict of interest. The members made their own rules. The by-laws were set to protect the brokers. As a profit-making enterprise, it should not have had the power to regulate itself in its own favour to protect its profits, instead of seeking strategic growth.
Would the Monetary Authority of Singapore (MAS) be willing to set up a separate governance or regulatory unit, independent of SGX?
In addition, instead of minor “touch-ups” such as smaller board lots, the minimum trading price policy and caution alerts, both the MAS and SGX need to employ “helicopter vision” and remove some of the limitations to SGX becoming a global exchange.
For example, in Singapore today we can have a company listed in Singapore from a foreign country and operating in Australian dollars, Malaysian ringgit or Hong Kong dollars. But the banks can deal only directly in Singapore dollars and US dollars. This makes an investor reluctant to invest in such counters, as the conversion fees the banks and brokers charge are expensive, and distort the real trading costs.
Another issue is the lack of a single stock options market. SGX has abandoned such efforts before because it is expensive running a new system, and it takes time for investors to warm up to a new instrument.
But in today’s global market, local options traders are turning to the US and Hong Kong, where such markets are available. Such trades create for the exchange much higher volume, because they are instruments fund managers use to hedge their positions. But would SGX be willing to put up with some short-term pain to modernise and give the investor more options? Herein lies a conflict.
