Private exchanges augment public markets, make financial ecosystem more complete: HGX chairman

Singapore

ASIA's private securities exchanges are still in an early phase of development compared to their peers in the United States, said Richard Teng. The newly appointed chairman of HG Exchange believes private exchanges will play a complementary role to their public counterparts instead of replacing them.

Mr Teng, a veteran in Singapore's finance industry who is now based in Abu Dhabi, was sharing his views on private securities exchanges with The Business Times over the phone on Monday. He said private capital markets are steadily gaining momentum in deal volumes as more companies delay their initial public offerings or go private.

This has led to abundant opportunities in the private capital markets, with their "vibrancy in activities" surpassing their public counterparts. The ongoing coronavirus pandemic has in fact meant that many cash-strapped private firms need to raise funding to shore up their liquidity, he said.

Mr Teng is also the chief executive of the Financial Services Regulatory Authority at Abu Dhabi Global Market, following a stint as the chief regulatory officer of the Singapore Exchange as well as a career that spanned over a decade at the Monetary Authority of Singapore (MAS).

Mr Teng sees both public and private exchanges serving different segments of the market, with the private exchanges augmenting their public counterparts to make the financial ecosystem "more complete".

On how many private exchanges he expects to see for the Asian market, Mr Teng said he is unable to make any prediction but is "confident in the robust growth of private markets".

HGX's founding members are PhillipCapital, PrimePartners and Fundnel. They have just begun trading private company shares on the live exchange.

HGX declined to share the value or number of deals concluded so far, nor did it give examples of private companies traded on its exchange. It would only say there was a healthy flow of buyers and sellers via its member firms.

HGX had entered MAS's fintech regulatory sandbox in June to test a marketplace for private company shares. With sandboxes - created by limiting the scale and reach of the experiment - MAS assesses applications and relaxes specific regulatory requirements for the duration of the testing. Examples of such requirements include credit ratings, minimum paid-up capital, track record and fund solvency.

HGX says it can also offer digital assets using blockchain technology, thereby allowing the trading of smaller lots at a fraction of the charges associated with a public listing.

This will benefit issuers who seek partial liquidity or own a limited amount of shares, such as employees of private companies with employee share options or employee share ownership plans, HGX said.

The member-driven private exchange leverages the network of brokers and customers of its three founding members to automatically link 500,000 investors online. Only accredited investors and institutional investors are allowed to access HGX trading.

After the sandbox phase, HGX may be granted a full market operator licence. Currently, 1exchange is the only regulated private securities exchange in Singapore.