TAIPEI - Exchanges worldwide should play a greater role in the financial markets in the light of the global financial crisis, said Singapore Exchange (SGX) chief executive Magnus Bocker.
The financial crisis is really showing the importance of transparency, openness, integrity, trust and fair markets, he added.
Exchanges, by their very nature, cover a wide range of asset classes, and can do more to promote trust, transparency and good corporate governance.
Mr Bocker told The Straits Times: "Some of the issues we've seen since 2008 are markets being over-leveraged, opaque... these create a lack of trust and understanding.
"Exchanges that are open and transparent can add a lot of value to create better understanding, better pricing."
Mr Bocker was speaking on the sidelines of the World Federation of Exchanges' 52nd general assembly and annual meeting, which ended in Taipei yesterday.
The role of exchanges does not stop at just stocks these days.
He said: "You normally think about it as a stock exchange, but it's also in the futures market, the fixed income, FX (foreign exchange), different asset classes, sectors of the financial markets, where exchanges can add value to investors and other stakeholders."
One key challenge plaguing exchanges globally is the weak trading volumes.
Mr Bocker said: "Volumes are declining globally... it's a big risk to investors.
"With that follows a lack of liquidity and markets drying up, and investors are the ones who pay the price for that."
Having high-frequency trading would be one way of boosting liquidity in such times, he suggested, adding: "The declining volumes need to be mitigated by a better sense of systems.
"We need to support better liquidity, and high-frequency trading would be one. But we need to be clear on rules and the regulation for them."
Singapore has not been spared from the global volume decline, although its fate has been relatively better than those of its peers globally.
The average daily value of Singapore stocks traded fell 20 per cent in the three months ended Sept 30, but this corresponding figure fell an average of 32 per cent in Europe and 39 per cent in the United States during that period.
Mr Bocker said with regard to SGX's first-quarter volume: "It's not a healthy start... but on a relative basis, we are doing okay. If we haven't done all these things, I'm sure it would have been much worse."
Various measures, such as having more investor education via the My Gateway portal, better technology and lunchtime trading, have been introduced to spur volumes.
Uncertainty about the global economy needs to go away before stock trading volumes will pick up, Mr Bocker noted. "Uncertainty about Europe, US and China is slowly disappearing. When you have a few of those certainties, it'll help the market to come back. It'll eventually happen."
More can also be done to encourage retail investor participation.
The Central Depository System holds the shares of about 1.5 million individual investors, but only 180,000 had at least one transaction in the July-September quarter.
Mr Bocker said: "We're still an under-penetrated market for retail investors. There is less than 10 per cent of Singaporeans active in our market."
The figure is half the level in Australia, and one-third of that in Hong Kong.
But Singapore has fared better when it comes to public listings. Its gross domestic product is 1.4 per cent of Asian GDP, but Singapore raised 6 per cent of the region's initial public offering (IPO) funds. Mr Bocker said: "We're punching about four to five times above our relative weight in that market."
IPO interest in Singapore has been picking up in recent months. He noted: "More companies are coming to the market as the sentiment is better today than it was six to nine months ago."
But merger and acquisition (M&A) talks between exchanges have cooled following several big-name ones that fizzled out in recent years.
One of these was the much talked-about US$8.4 billion (S$10.3 billion) merger involving the SGX and the Australian Stock Exchange, which was called off last year after political opposition in Australia.
Mr Bocker said: "Generally, the M&A discussion among exchanges is much lower today than it was a year ago. There were a few attempts and they didn't succeed. One theme in that there are differences in rules, regulations and underlying laws in different markets."