SINGAPORE may have to reduce overlaps between the oversight functions of the Monetary Authority of Singapore (MAS) and the exchanges as industry competition increases, a key MAS official said.
Addressing various issues regarding Singapore's securities market in an opinion piece published on Friday in the Singapore media, MAS managing director of financial supervision Ong Chong Tee said the regulator is also open to improving arrangements to help remisiers adapt to continuous all-day trading. Also, MAS and the Singapore Exchange (SGX) will hold dialogue sessions with various stakeholders to gather feedback and ideas to improve the country's capital markets.
The opinion piece also gives a hint of the direction in thinking on Singapore's securities sector.
MAS and SGX have made a number of regulatory changes over the past year to strengthen Singapore's securities market in response to concerns about market irregularities, low trading volumes and a lack of quality listings, Mr Ong wrote.
The measures "aim to achieve a robust and vibrant securities market, where companies can raise capital efficiently, investors can pursue their financial objectives, and intermediaries can serve their customers' needs effectively", he said.
Noting that the industry landscape was becoming more competitive, Mr Ong noted that there could be room to improve the way exchanges and markets are regulated. An exchange such as SGX currently is both a commercial entity as well as a regulator.
"In a more competitive multi-exchange landscape, there is a need to mitigate potential conflicts of interests and ensure efficiency in regulation," Mr Ong wrote. "For example, there could be scope to reduce any overlaps between the oversight functions of the MAS and the exchanges."
Until now, the position usually taken is that the current regime in which the SGX is both regulator and commercial exchange poses no fundamental issues.
Addressing remisiers, who have been especially vocal and often disapproving of the many changes in the marketplace, Mr Ong urged them to adapt to the times.
"Brokerage firms and remisiers need to broaden their services beyond merely executing trades for their clients," he pointed out. "For example, they could provide personalised advisory and risk management services, catering to the specific investment needs of their clients."
Addressing an often-raised issue by the Society of Remisiers, Mr Ong asserted that it is not tenable to reverse the course on continuous all-day trading (CAT) and bring back the lunch hour.
"The larger question is whether Singapore as an international financial centre can afford not to have CAT," he wrote. "Financial markets trade round the clock. CAT is a common feature in major markets including the US, UK, Australia, and Europe. Investors in these markets are able to manage their exposures without a break in exchange trading hours."
But MAS is prepared to help remisiers better cope with all-day trading.
"When CAT was implemented in 2011, alternative arrangements were considered to assist remisiers to support their clients continuously, such as the channelling of transactions through brokers' central dealing facilities or via mobile devices," Mr Ong wrote. "MAS and SGX are ready to work with the affected parties to review whether these arrangements can be further improved."
MAS and SGX will also be having more discussions with market stakeholders.
"Some stakeholder groups have expressed a desire for even more dialogue," Mr Ong said. "MAS and SGX will hold joint roundtable sessions with various stakeholders to gather feedback and ideas to improve our capital markets."
In terms of the quality of listed companies, Mr Ong said that while SGX has raised the bar for mainboard listings, among other measures, a balance had to be struck in allowing businesses to access capital.
"Improving the quality of listings is important," he noted. "But a well-functioning securities market should also serve as a platform for companies in different phases of growth to list and raise capital as long as they meet the requirements."
He stood firm on a number of measures that have generated some controversy.
On SGX's introduction of a minimum trading price for mainboard-listed companies, Mr Ong wrote: "While there will indeed be some short-term adjustment costs, it is important to not lose sight of the longer term objective of enhancing the integrity of the market as a whole - one that is less prone to bouts of excessive speculation or manipulation."
Mr Ong also argued that the specified investment products (SIP) regime was essential to protecting retail investors, and customer suitability assessment could not be replaced by simple disclosures.
"The Lehman mini-bond episode has shown that a presumption that retail investors can understand the investment risk of complex products upon signing a risk disclosure statement is flawed," he wrote.
He also acknowledged that investigations into the 2013 penny stock saga have been going on for a while, but said the process was sometimes necessarily long.
"It is important that the investigation process be rigorous and not rushed," Mr Ong said. "There is often a web of details to be ascertained in each case. To be effective, investigations need to be confidential so as not to tip off suspects."