Central dealers orchestrating trading in the good old days / Photo courtesy of Chew Sutat
Q: Why do you wear the SGX (Singapore Exchange) lapel pin all the time?
A: ’Cause everyone in the room needs to know who is the one to blame!
Friends in the industry, media and other stakeholders often ask Q. Half-in-jest A is the answer.
But that is reality — almost — and here’s why.
In the blood
My father, who started his career as a teacher, became a remisier in 1969 — before I was born.
From an early age, I was fascinated with the stories and shenanigans of many market operators and tycoons who roiled the markets every time they caught a cold or found a new shiny fascination.
Those were the days when orders went through central dealers on voice boxes to the SES (Stock Exchange of Singapore), and prices were written on a chalkboard. Tickets were written and stamped — pink for “buy”, and white for “sell”.
As a kid, I ran around after school in the dealing rooms, where security and compliance were non-existent. The market started at 10am and rested for lunch at noon. Action restarted at 2.30pm and ended at 4pm — not forgetting the tea breaks.
Without CNBC, Bloomberg, the Internet or SBC Teletext, folks had to wait for the next day’s newspapers for share price updates. I had the job of updating by telephone the day-end prices written on those boards to my dad’s clients in Kuala Lumpur at the end of each day.
There were the booms, and also the spectacular busts. I made my way into the dealing rooms in 1979 — missing the oil shocks of the 1970s. However, the picture of Tan Koon Swan and his “assistant” Penny Chang, in big 1980’s sunglasses, making their post-Pan Electric 1985 crisis court appearance has somehow been stuck in my mind.
Some junior-college classmates had an image of me as Gordon Gekko of Wall Street — the movie — as we “won” the 1989 Financial Futures Trading competition jointly run by Aiesec and Simex (Singapore International Monetary Exchange) in the Nikkei 225 pit.
Life on the Street
In June 1993, when I turned 21, I opened my own CDP (The Central Depository) and trading accounts. I rode the 1990s Asian Boom, spent time in London’s post-big bang City (where contracts for differences were first used in UBS’ takeover of Warburg), and I served as president of Oxford University’s Investment Society before returning to serve my scholarship bond with DBS.
We set up the first Asian financial institution’s stock loan desk in the custody unit in 1997, lending shares to hedge funds and brokers for cross-border arbitrage (SES with Kuala Lumpur Stock Exchange, since renamed Bursa Malaysia) and other exotic strategies on converts.
What followed next was a huge industry clean-up right after the Asian Financial Crisis. Regional shocks hit our shores.
Then Malaysian Prime Minister Mahathir Mohamad, in his bid to insulate Malaysia’s financial system, triggered the nightmare of retail SES investors with the shutting down of Clob (Central Limit Order Book).
Investors — some panicky, most helpless — salvaged what they could as they migrated their shares. Fortunes were made and lost for the brave or foolish. The repercussions reverberated for years after that.
A stint in OCBC Securities followed, where I helped introduce retail stock lending to arm investors with tools that enabled trading the downside, not just the upside. This came in handy just before the dotcom bust where local darlings found gravity.
Running proprietary trading, we were principal market maker for a swath of on-exchange new products — like the STI (Straits Times Index) ETF, first series of structured warrants and Single Stock Futures for the newly merged SES and Simex — and facilitated high net-worth and retail access to over-the counter (OTC) equity products from investment banks.
Alongside all that, I wrote a monthly column for Smart Investor magazine.
After that, at Standard Chartered Wealth, we enlisted global investment banks to create multi asset products that needed price references from and risk management on exchanges.
After several approaches for me to join SGX during my 11 years on the Street, I finally had to accept the request in 2007 — just a year before the Lehman Brothers moment. SGX’s then-CEO, Hsieh Fu Hua, nailed it with the admonishment “to stop complaining about SGX” and “come do something about it”.
Why Chew On This?
The story of my 14 years at SGX is one for a book, perhaps in the future. But back to Q&A. Having played various roles in the industry, and been on both sides of a trade — winning and losing — one’s views of the market can be coloured.
Are you a listed company — one that is small or big, local or global?
Or, as an investor, are you an institutional investor, a hedge fund manager, a proprietary trader or retail investor? As a trader, are you short- or long-term; fat finger keyboard or algorithm?
If you are a banker, are you with one of the bulge brackets or are you with a boutique corporate finance firm?
As a market professional, are you the lawyer, accountant, public relations consultant or share registrar?
Are you the regulator keeping watch at the front line or setting policy behind?
Are you a practitioner or an academic?
The list goes on.
The alignment of interests between many of these constituents — for example, a broker, an IPO candidate, a banker and an investor — often does not exist, bar one: to make money.
Therefore, it is always easier to talk one’s own book and point the finger, and the easiest culprit is the one in the middle — the exchange!
Too much chlorine and there are no fish alive in a swimming pool. Too little and you will have bugs and other nefarious sharks around.
If the hurdles and expectations for listed companies are too high, our SMEs cannot raise equity capital to grow and compete internationally, and global firms go elsewhere. But if they are not high enough, we may not have investors.
Long-term investors like cheaper, narrower bid-ask spreads; market-makers and some brokers like it wider. The delicate balance of rules, market structure, etc, may not satisfy the governance perfectionists all the time, but must engender enough free play to draw global liquidity and capital to Singapore.
And to calibrate it from time to time — especially to reverse and revisit changes — is never trivial.
I have, in my time at SGX, both taken away my remisier dad’s lunch break when he was 75 years old, and subsequently restored part of it when he was 80. While there will be a time and place for everything, the market moves on. Those who go along with it often profit. Standing still is never a solution.
Chew On This. This column, starting from The Edge Singapore’s 1,000th edition, intends to offer a different perspective from the usual voices, some facts, and a considered view on the issues of the day. It may occasionally wander into the odd market or sector or company commentary.
You may agree or disagree, but hopefully we can enjoy the food for thought and have the odd laugh at ourselves — a community of kindred market spirits — with a positive bias for the success and sustainability of our capital markets.
Chew Sutat retired from Singapore Exchange (SGX) in July this year. He was senior managing director of SGX, and member of SGX’s executive management team for 14 years. On his watch, the exchange transformed from an Asian gateway into a global multi-asset exchange.
A retirement gift from Chew’s colleagues from the equity capital markets team at Singapore Exchange — with an alternative presentation of actual facts
