Building a vibrant stock market is a shared responsibility

ALMOST exactly a year ago, 1,225 trading representatives (TRs) signed a petition to the Finance Minister that listed suggestions to improve their profession and conditions in the local stock market.

That petition was born out of despair and disillusionment formed in the wake of deteriorating market conditions and a claimed loss of retail confidence in local equities after 2013's penny stock crash.

What then ensued was a series of meetings between TR representatives and officials from various regulatory agencies that culminated in a dialogue last week between TRs and the Singapore Exchange (SGX), the Monetary Authority of Singapore, the Institute of Banking and Finance and the Securities Association of Singapore, and an announcement by SGX that it will conduct a sweeping review of its business.

By all accounts, the dialogue developed into a feisty, lively and sometimes confrontational affair - perhaps understandable, given that the market has weakened even further over the intervening 12 months.

Some of the criticisms fired at the authorities during that session were probably justified although some were not - for example, local officialdom cannot reasonably be blamed for sliding oil prices, China's possible hard landing or US monetary policy that have pummelled equity markets all over the world. Still, cutting to the chase and setting aside the finger-pointing, two important observations are possible.

First is that some concessions originally sought were actually granted by officialdom, and this should go some way towards demonstrating good faith at trying to help TRs in a difficult time.

For instance, the introduction of collateralised trading will now be pushed out to 2018, which should come as a relief to TRs who rely on "contra" trading business, or the buying and selling of shares without upfront cash. Critics of contra might argue that this only delays the inevitable, but there's no denying that TRs as a whole would be relieved that one source of income will not be shut - yet.

Also encouraging was an agreement to relax the rules to allow TRs to take on other jobs, while yet another is SGX agreeing to look at ways to allocate more shares to the public for initial public offers.

These developments should help address the widely-held, if cynical, view that last year's petition and all meetings since then would eventually lead to nothing because high-handed officials here are: a) out of touch with the ground; b) do not care about TRs' welfare; and c) will do what they want anyway.

However, the second observation is that improving the market and building vibrancy cannot be a one-sided affair and must be a shared responsibility.

Granted, SGX, MAS and other related regulatory bodies have pivotal roles to play, but brokers are perhaps equally important pieces of the market eco-system.

For example, if 2013's penny stock episode has eroded retail confidence, then compliance departments in broking houses can play a part in rebuilding trust since they can, by virtue of their tracking of trades done by their TRs, intervene to stop stocks from being artificially rigged and manipulated, nipping bubbles in the bud and preventing crashes.

TRs and retail investors who suspect wrongdoing can make use of SGX's "whistle blowing" avenue, which can be found under the "Contact Us" icon on the top right of its website home page.

Research analysts, bankers, auditors and underwriters all perform vital functions, thereby contributing towards strengthening disclosure, governance and transparency, all of which are key ingredients in building a trusted stock market. It is everyone's responsibility to help bring vibrancy back to local stocks and the faster this is acknowledged, the better.

This article was first published on February 3, 2016.
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