SGX proposes changes to ease entry of new remisiers

This article is more than 12 months old

Singapore Exchange seeking public feedback on proposals

The minimum requirement for remisiers to furnish a $30,000 banker's guarantee to broking houses before they can do business may be axed in a bid to encourage more people to join the industry.

The change will give brokerages full flexibility to set the amount of security deposit required of a remisier after conducting a credit assessment.

Another key proposal put forth by the Singapore Exchange (SGX) yesterday will give remisiers more leeway to operate away from their desks. Brokerages will no longer be required to obtain written customer consent each time a remisier starts mobile broking.

Mr Tan Boon Gin, chief executive of SGX RegCo, the bourse's regulatory unit, said: "We are trying to move from a very prescriptive approach to a more principles-based approach, to give the broking houses more freedom to take risk management into their own hands."

Market players approached by The Straits Times said the SGX is heading in the right direction, although some questioned if these small steps could really move the needle.

For instance, the SGX hopes that younger remisiers who have less business and can put up only a smaller deposit will find it easier to do business once the minimum deposit sum is removed.

One senior dealer said: "Knowing the broking house management, my expectation is that it will be cautious. If you're a new entrant, why would I give you a free hand? Nobody will give you a big line (of credit) without some understanding of your clientele.

It's essential that in-house remisiers and off-premises remisiers are seen as providing the same level and quality of service. Mr Jimmy Ho, president of the Society of Remisiers

"The value-add from new entrants will be limited.

"The industry has shrunk. My impression is that many dealers and remisiers are just doing their own trades, not many are servicing clients. Anyone coming into the industry right now must come in with a good client pool."

At the end of last year, 1,097 dealers and 2,355 remisiers were active in the Singapore market, down from a high of 1,333 dealers and 3,032 remisiers in 2011.

Mr Jimmy Ho, president of the Society of Remisiers, said removing the minimum security deposit requirement "sounds good in the name of liberalisation but just because SGX has removed the requirement doesn't mean the houses will.

"They have the liberty to do what is required to shed their credit risk".

Yet, market volumes have died down, and $10,000 is a more reasonable deposit size that could be used as a guide, Mr Ho said.

But he welcomed the steps to make mobile broking more user-friendly: "It's essential that in-house remisiers and off-premises remisiers are seen as providing the same level and quality of service."

Other proposed changes will also clarify market practices in areas such as error trades and SGX investigations.

The SGX is seeking public feedback on the proposed changes, with consultation open till Nov 7.

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