These are healthy and positive news for the stock broking industry. Singapore has, in the last few years, transformed its stock broking industry into an industry of the future. Stock and stock prices have increasingly become irrelevant in the new business model. We used to have blue chips trading at $20 to $40, mid range stocks between $5 to $10, and cheap stocks between $1 to $2. Today our blue chips are trading at around $10, midrange around $1 to $3 and at the bottom, 1c to 2c or less than 1c. But this is changing fast as the new rules required the super penny stocks to consolidate, just like post CLOB Malaysian shares, 1000 shares became 10 or 1 share, to improve the prices to between 20c and 40c. It will look less ridiculous for the main board when the exercise is completed.
But these changes would mean nothing when trading activities is no longer there or needed. The exchange doesn’t even need investors or retail traders. The computers are doing all the trading and trading in derivatives. The net effect, there will be no need for stock listing. That speaks for the lack of IPOs in the SGX. There will be no need for traders and also no need for remisiers. Many have left the industry and many on the way. Broking houses are still doing roaring business without the need for remisiers and planning to retrench more in the new year. Some have started.
Have no fear, all these are just teething problems for an industry in transition to be better. In the new stock trading business, cannot call it stock broking business as there will be little broking activities left. The word stock would also become misleading if trading is all about derivatives. There will be no need for stocks, no need for traders, no need for remisiers, no need for broking houses. The industry will just have computers trading against each other on derivatives from anything they can write on.
The industry of 40,000 people would become very manpower efficient. The new business model would probably need less than 1000 people to provide the supporting roles mainly programmers and derivative writers and the rest run virtually by computers.
Singapore has embarked on the most innovative change in an old industry. Not sure what would be the new name for the stock exchange. Definitely there is no need for the word stock as stocks would be replaced by derivatives. Exchange may need to be changed too as it would no longer be an exchange but more like a computer game. I am sure the new name for this industry would be something fascinating and pleasing to the ear, futuristic like ‘You know ya’ or something like that.
This is progress. No other exchange could have thought of it. We are ahead of the world in transforming our stock exchange into something else, unheard of. That is how innovative we have become.