Open letter to Singapore Exchange regarding Continuous all-day trading
With regards to Singapore Exchange’s public consultation on continuous all-day trading, I have a few personal reservations about it. Below is my open letter. I believe continuous all-day trading is not necessary in the Singapore market, or most other Asian stock markets in general as the benefits are not necessarily more than the disadvantages that come with it. Unlike in US, brokerage firms play a key role in the eco-system here. In US, unless you pay top money for a full service broker, you would probably end up using a discount broker, which do not have a trading representative tied to the account. The reason why this can happen is because risk management can be calculated and computerised. This is largely due to the difference in evolution of equities trading and trading account management. In Singapore, contra trading is common. Deposits by clients, if any, tend to be around 20% to 50% of the trading limit, as opposed to 100% in most US brokers. Thus, trading representatives play a very important role as risk managers as they are usually the ones who underwrite the credit risk of the clients. Business in general tends to be conducted very differently in Asia as compared to the Western countries. In Asia, people tend to cultivate a more informal relationship while pursuing a business relationship. It is because of that you hear the common phrase ‘guan xi’. This is no different in Singapore. While trading and execution is a significant part of the job, trading representatives spend a large amount of time meeting up with clients over meals and having casual chats. Besides meeting clients, trading representatives also have to juggle with attending analyst briefings, luncheon presentations, or simply just catching up with the latest news. For a trading representative who is committed to providing quality service, one would be reluctant to leave his trading desk during market hours. As such, most of such activities happen when the market is closed, such as before market, during lunch hour, or after market. For established brokers, some of them would hire trading assistants, so that they can devote more time...
read more
