Trading reps must adapt to disruption and transformation in the markets

COPING with technological disruption has become the No 1 priority of many companies. Retail businesses, for example, are struggling to meet the challenges posed by online shopping sites, traditional taxi companies have found themselves marginalised by new platforms that link drivers with passengers via smartphone applications and travel agents have been rendered almost wholly irrelevant by websites that offer seamless travel at lower cost.

Many more examples can be found but it is clear that in all cases it is mainly the middleman who straddles the space between manufacturers or service providers and end-users who suffers most from disruption and who has to transform in order to survive. In the context of the local financial industry, the need to transform is most obvious in the stock market, where rapid advances in technology have disrupted the traditional dealer-client relationship and forced exchanges to rethink their existing business arrangements. Before proceeding, it is worth noting that if disruption can be equated with increased competition, then Singapore stock-broking suffered its first disruptive event in 2000 when the industry fully deregulated and commission rates were slashed. At the time, liberalisation was welcomed as it was thought that trading volume would increase in tandem with lower transaction costs and thus create a more vibrant equity market in which participants of all sizes could thrive.

The fact that this has not really materialised in any appreciable fashion can be attributed to several factors - the dotcom crash in 2001, the Sars epidemic in 2003, the S-chip collapse in 2006-2007 and the US sub-prime crisis in 2008 whose effects are still lingering. Coming just after the demise of Clob International in 1999, these successive shocks have sapped much confidence in the stock market and prompted scores of retail players to switch their focus to other investments, most noticeably real estate. However, it is also probable that lower transaction costs are only one factor which investors consider when participating in equity-market trading, and that equally important are superior advice and service.