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Mr Stephen Lai, CEO, NextVIEW Group
Mdm Phan Thi Tuong Tam, Deputy CEO, Ho Chi Minh Stock Exchange
Mr Geoffrey Sawyer, Head, CMC Markets Singapore
Distinguished guests
Ladies and gentlemen
Good morning.
I am indeed honoured to be invited to this morning’s proceedings. I am pleased to note that ATIC, into its second year, continues to be pivotal in bringing together a community of participants from different segments of the marketplace. Last year, I spoke on the need for the exchange and the supporting professionals to empower investors with information and knowledge. This morning’s event is evidenced of the continuing effort in this important direction. Please allow me to congratulate NextVIEW on a successful convention.
You have all just heard Stephen speak on “How to get retail investors to return to the market.” This is a timely topic, as many investors may have been daunted by the recent volatility in the markets. However, investors who are savvy and do their homework well stand in good stead in all types of markets – bull, bear or sideways.
Today, I would like to share with you some of SGX’s recent key initiatives aimed at further developing the market, with the goal of building a robust and enduring marketplace. These are largely focused on improving market efficiency and widening the product range for participants to better manage their investments and risks. This in turn attracts a wider spectrum of participants to the market.
Many of our initiatives are driven by our desire to operate a more compelling and vibrant capital market. By positioning ourselves as the Asian Gateway, we offer issuers and banks a robust platform to raise capital. The varied range of products made available has made it more efficient for investors to manage their portfolios and risks. This is supported by a robust regulatory framework which promotes investor confidence and upholds market quality.
We offer multiple access points and products with international underlying assets – this is the mark of an international exchange. For example, nearly 40 percent of our listed companies are foreign-originated, hailing from more than 20 countries. In addition, the platform is also host to structured products like REITS, business trusts, infrastructure funds and structured derivatives, to name a few.
The diversity attracts the entire spectrum of participants both domestically and globally. Traditionally, individual investors and portfolio managers dominate. However, the growth in hedge fund and absolute return fund community has resulted in this segment taking a significant positioning. We are now experiencing the presence of algorithmic (and other high velocity electronic) traders. This segment, which demands additional trading functionalities, is expected to feature prominently in our marketplace in the near future.
So why is this phenomenon important? It is because diversity in participants and product offerings in a capital market is essential to building a market with breadth and depth. An observation of the global markets in the past six to nine months would help illustrate. An event triggered in the west almost inevitably resulted in a much exaggerated shorter term reaction from Asian markets, with Europe and even the US markets showing greater resilience. One explanation could be the relative absence of adjacent asset class (i.e. limited product range) important in managing risks – hence, the only viable avenue is an outright exit from the market. The other explanation could be a less diversified market participation in Asia, i.e. insufficient arbitrageurs and algorithmic traders who are able to go on the opposite side of the trade. The conclusion drawn is that a diversified participation base could firstly, mitigate extreme volatility, and secondly, enhance liquidity in a downward sliding market.
In this regard, I would now touch on six key initiatives we have undertaken in the last four months alone, which are targeted at improving access and market efficiency, thereby improving breadth and depth in our market.
First, one of our most significant recent initiatives is the revamp of SESDAQ into Catalist, our sponsor-supervised board for local and international fast-growing companies. Catalist will give companies with strong potential but with limited track record, a platform to raise funds to enable their continued growth. The process allows a much faster time to market for IPOs and secondary fund raising. Catalist offers investors an opportunity to participate in the growth of such companies.
Second, we launched the SGX Mini Nikkei 225 Index Futures contract as well as reduced the size for the SGX Nifty India Index Futures contract last November. Smaller size contracts are more affordable for market participants in terms of capital outlay and costs, as well as allow them more precise hedging and trading.
Third, we introduced the revised minimum bid sizes to lower trading costs in the securities market last December. The narrower bid-ask spread has resulted in greater efficiency in trade execution and enhanced the overall competitiveness of our securities market.
Fourth, we partnered FTSE and SPH to launch the revamped Straits Times Index and new FTSE ST Index Series. This is the first major revamp of our market indices in 10 years, adopting a globally recognised methodology for our indices. The new mid-cap, small cap and thematic indices, such as the FTSE ST China Index, provide greater coverage of different segments of the market. We expect this to stimulate the development of more index-related products, spurring greater trading on our exchange.
The other two initiatives were launched just this week. On Monday, we welcomed the launch of warrants on Taiwanese underlyings by the first Taiwanese issuer on a foreign exchange. This significant milestone further strengthens our position as an Asian hub by providing our local and international investors with access to new opportunities, in yet another market. A key feature of our structured warrants market is the access we provide to foreign underlying assets/securities. More than 37 percent of the traded warrants are based on foreign underlyings.
On Wednesday, we launched our new, improved SGX DerivativesQuote data engine. This enables us to enhance data dissemination to market participants – at a new speed more than 10 times faster. This in turn allows brokers and data vendors to offer a more comprehensive data suite to their customers. The data empowerment strengthens investor confidence and contributes to increased market liquidity. The new engine will also meet additional requirements in the market such as algorithmic trading and enhanced data fields.
Looking ahead, we will soon launch a single stock derivatives product. They are exchange-listed derivatives on single underlying securities which are listed or quoted on our securities trading market. Investors trade the derivative with an exposure into an underlying stock at an agreed price on the day of the trade. The trade will then be settled at a future date.
Single stock derivatives will enable individual investors to reflect longer-term views, long or short, in the market with transparency and capital efficiency. It will also pave the way for more varied exchange traded equity derivatives products to be introduced, allowing for greater hedging and arbitraging opportunities. We have consulted the market on this new product and are incorporating their feedback to finalise product specifications.
The slate of initiatives to improve efficiencies and broaden the product suite serves to attract a wider spectrum of participants. These represent a snapshot of our continuing drive to build an enduring marketplace. Ultimately, the provision of an Asian Gateway must result in benefits to both professional and individual investors alike. For that, we will need to collaborate with all market participants, to add to the overall attractiveness and vibrancy of our marketplace.
It leaves me now to once again, express my appreciation to Stephen and NextVIEW for organising this event. I wish you a fruitful day. Thank you.
