"The Changing World" - Keynote Speech
by Ms Jacqueline Loh, Deputy Managing
Director, Monetary Authority of
Singapore, at The World Federation of
Exchanges General Assembly and Annual
Meeting on 9 October 2019
Mr. Loh Boon Chye, Chief Executive Oicer, Singapore Exchange (SGX),
Dr. Urs Ruegsegger, Chairman, The World Federation of Exchanges,
Ms. Nandini Sukumar, Chief Executive Oicer, The World Federation of
Exchanges,
Ladies and gentlemen, good morning.
Introduction
1   Let me begin by welcoming you to Singapore for the World Federation of
Exchanges 59th General Assembly and Annual Meeting.
2   Exchanges have a long and illustrious history, dating back to the
establishment of the Amsterdam Stock Exchange from as early as 1602. Four
centuries on, exchanges continue to play a crucial role in facilitating trade and
disseminating information, enabling companies to raise capital, and providing
investors with a fair, orderly, and transparent marketplace to trade financial
assets and carry out risk management activities.
3   The World Federation of Exchanges ("WFE") has played a critical role in
promoting the development of organised and regulated markets to meet the
world's capital raising needs. As the leading global industry group for
exchanges and clearing houses, the WFE has actively pushed for greater
industry collaboration and international regulatory coherence to make public
markets more vibrant and robust.
4   The agenda of this year's WFE General Assembly and Annual Meeting will
further the WFE's objectives and work as it covers a wide spectrum of issues that
are forward-looking and relevant to how WFE members can navigate the
changing world. These include the future of capital raising and the adoption of
distributed ledger technology. In the same vein, I will speak about three trends
that continue to shape the financial markets of tomorrow - sustainable
finance, technology and innovation, and the evolving dynamics of our
public and private markets.
5   Before I outline these trends, let me first start by setting out the
macroeconomic picture, as this is the backdrop against which we must view
these developments.
Global Economy - Heightened Uncertainty
6   There is no doubt that these are challenging times. Global growth is expected
to slow going forward. IMF's World Economic Outlook forecast for April 2019
[1]
sees global growth moderating to 3.3% this year, from 3.6% in 2018 .
Indications are that the October World Economic Outlook to be released next
week will likely paint a cautious assessment of global growth prospects and
include downward revisions to growth forecasts. Slowing global growth is
chiefly due to an elevated level of policy and geopolitical uncertainty, with
ongoing trade tensions that continue to dent business sentiment and
investment. These ongoing developments have important implications for the
financial industry and we need to be vigilant and flexible to adapt and respond.
Regional Developments: ASEAN - Grounds for Optimism
7   Within ASEAN, the picture is rosier. According to the IMF, the major ASEAN
economies are expected to continue outperforming emerging markets and
developing economies as a whole, with projected GDP growth of about 5.0%
[2]
annually for 2019-2020 . ASEAN has become one of the fast-growing regions
in the world in the last few decades, and is home to eight of the world's best
[3]
performing developing economies . Looking ahead to 2050, it is projected
that ASEAN - with a population of close to 800 million people by then - could
[4]
become the fourth largest single market, behind China, India, and the US .
• In the next few years, growth in ASEAN will continue to be driven by intra and
extra-regional trade as well as strong investment flows, even as domestic
demand will play a more important role.
• ASEAN also has demographics on its side: we are for the most part a young
region, with a rapidly growing middle class who is increasingly consuming
higher value-added goods and services.
• Asian wealth accumulation is also growing quickly. Assets under
management in the Asia Pacific is expected to increase faster than any other
region globally, almost doubling from 2017 to about US$30 trillion in 2025.
This will result in increased demand for investment opportunities across a
wide range of products like equities, fixed-income, and risk management
tools.
8   These factors underpin the promising economic prospects in ASEAN, with
the corresponding need for regional enterprises to raise capital to support their
growth.
9   Looking ahead, these are opportunities to be harnessed both within ASEAN
and globally, and exchanges as well as clearing houses need to innovate and
remain relevant to all stakeholders. I will now speak about three key trends, the
opportunities they present, and what MAS is doing to support the Singapore
financial services industry in these areas.
Trend 1: Catalysing Sustainable Finance for Growth
10   The first trend is growth in sustainable finance. This is increasingly an area
of both concern as well as interest to financial players, especially millennial
investors.
11   The estimated financing needs to support the greening of Asian economies
are high. China has estimated that it will require US$450-600 billion of
investments annually to achieve its green policy goals under its 13th Five Year
Plan while ASEAN will need an estimated US$200 billion in green investments
[5]
annually through 2030 .
12   Sustainable finance is still at a nascent stage but we are seeing increasing
focus from financial institutions to develop new environmental, social and
governance ("ESG")-related products. Similarly, with increased investor demand
and awareness for sustainable financial products, exchanges like yourselves can
look to expand and support product oerings that will meet the needs of socially
and environmentally conscious enterprises and investors.
13   One such area of growth is in green bonds. Global green bond issuance
volume reached US$168 billion in 2018, a four-fold increase from US$42 billion in
2015. The Asia-Pacific region accounted for almost US$50 billion of issuance, or
almost 30% of global volumes, of which US$31 billion was from China.
Exchanges can support the listings of green, social, and sustainability bonds, as
countries and corporates transition towards a low-carbon and climate resilient
model.
carbon transportation .
14   Exchanges can also play an active role in supporting sustainable growth
through sustainability reporting and integrating sustainability
considerations in products that you launch. In particular, sustainability
reporting is a key tool in encouraging enterprises to integrate ESG considerations
in their performance and value proposition to both internal and external
stakeholders.
• Sustainable reporting has become more important with growing concerns
from consumers and investors that financial returns are achieved with
integrity, backed by ESG considerations.
• In recognition of such trends, the Singapore Exchange ("SGX") has introduced
a "comply or explain" regime for sustainability reporting in 2017, where listed
companies are required to disclose and explain their sustainability practices.
• ASEAN governments have also imposed regulatory drivers, to assist
companies with identifying gaps and areas for improvements in their
[7]
sustainability eorts . For example, in the mining and minerals sectors,
companies are subject to commonly-agreed-upon regional guidelines for
assessing and reporting on the aected environment.
15   We are heartened that the WFE has taken the lead in advancing the
sustainability agenda in two particular areas:
• First, the integration of sustainability with commodity derivatives. The WFE
has published a white paper that explores how commodity derivatives
exchanges could create new mitigation or investment tools that respond to
environmental challenges, and incorporate sustainability elements into
existing contracts; 
• Second, the adoption of sustainable practices and principles. The WFE has
partnered the United Nations Sustainable Stock Exchanges to set out a
blueprint to support exchanges in embedding sustainability in their
operations.
16   Overall, these eorts will drive wider discussions on sustainability as well as
provide guidelines on how WFE members could adopt relevant sustainable
practices and principles in their strategies for growth and operations.
Trend 2: Leveraging Technology Developments and Innovations
17   The second trend relates to technology. Technology is widely viewed as
having the potential to be a significant disrupter to financial markets globally,
whilst oering tremendous opportunities, including changing traditional ways of
doing business, lowering operating costs and enhancing productivity.
18   In its current form, securities trading and clearing involve many
stakeholders from exchanges, clearing houses, broker-dealers, and agent banks,
which adds to frictional costs and lowers the eiciency of trading and clearing.
Exchanges have shown growing interest in technologies like distributed
ledger technology ("DLT") to develop solutions that could simplify and
speed up some of these processes.
• Many of you have made significant headway in deploying technology in
[8]
multiple ways. A 2018 report commissioned by Nasdaq found that 70% of
stock exchange operators surveyed were working on pilot projects to deploy
DLT. This includes exchanges from the US, Europe, Australia, and Singapore.
• In Singapore, SGX and MAS successfully developed Delivery vs Payment (DvP)
capabilities for the settlement of tokenised assets across dierent blockchain
platforms last year. This can simplify post-trade processes and shorten the
settlement cycle. Australia's stock exchange, the ASX, is also using blockchain
to replace its post-trade clearing and settlement platform.
19   To support technological adoption and innovation in the financial sector,
MAS introduced the FinTech Regulatory Sandbox. The sandbox is also a
regulatory innovation for MAS, where we support financial institutions and
fintech players to experiment with innovative financial products or services in a
live environment, within well-defined boundaries. Upon successful
experimentation and exit of the sandbox, entities will then have to comply fully
with the relevant regulatory requirements.
20   The sandbox has been well received. Since its launch three years ago, MAS
has provided guidance to more than 250 firms, and received more than 60
applications to experiment in the sandbox. iSTOX, a private market platform
leveraging on DLT and oering the trading of tokenised private securities, is the
first market operator to enter MAS' sandbox.
21   The approach that we have adopted requires an extensive review of each
application. This is necessary as each sandbox is customised to facilitate
meaningful experiments, with appropriate safeguards to contain the
consequences of failure. We have learnt along the way that for certain types of
activities regulated by MAS, risks can be well managed within certain specific
boundaries. Hence, we launched an enhanced version of the regulatory
sandbox, Sandbox Express, to complement the current sandbox approach, in
August this year. For a start, we have oered three activities under Sandbox
Express, including the activity of establishing or operating an organised market,
which may be of interest to WFE members. This provides firms with a faster
avenue to test innovative financial products and services in the market.
Trend 3: Remaining Nimble to Developments in Public and Private Markets
22   Lastly, of crucial relevance to Singapore and the WFE, is the changing
dynamics of public and private markets. Globally, capital raising by
[9]
enterprises has been shiing from public to private markets . This shi is
driven by a combination of factors, including secular factors, such as the
increased importance of intangible assets, as well as cyclical factors, such as the
abundance of private capital, higher expected valuations in private markets, and
[10]
low interest rates globally .
23   New firms are also taking longer than before to tap on public funding via an
IPO listing, with the average firm age of technology companies going public
increasing from four years in 1999 to 12 years in 2018.
24   Most exchanges over the world are also seeing a trend of de-listings, as
public companies go private or are acquired. In the US, the number of listed
[11]
companies in 2018 stands at just over 4,000, half of that in 1996 . Similar
trends have been observed in the United Kingdom and parts of Western Europe
[12]
. On the flipside, we are seeing significant growth in the number of
privateequity ("PE") backed companies, with the number of such companies in the
[13]
United States doubling from about 4,000 in 2006 to about 8,000 in 2017 .
25   Reforms in the Markets in Financial Instruments Directive II (MiFID II) have
also aected the global investment research climate, with potential spill-on
eects on the liquidity and vibrancy of public markets. Research budgets are
shrinking and small to mid-cap stocks are increasingly seeing a reduction in
[14]
research coverage . These factors could impact the liquidity of public
markets, especially for thinly-traded smaller firms which may not receive
suicient investor attention despite having strong fundamentals.
26   Amidst these trends, there is a need to respond to changing funding needs
and be flexible to accommodate these evolving business models.
27   In Singapore, we seek to support corporates' financing capabilities and
needs across the corporate lifecycle - from early stage financing to mature
companies looking to tap on financing from public markets. As part of
Singapore's Financial Services Industry Transformation Map (ITM) to transform
Singapore into a leading global financial centre that connects global markets
and supports Asia's development, MAS has introduced a number of initiatives to
support enterprise financing in both private and public markets.
• Venture capital and private equity managers are an essential element in the
financing lifecycle, by providing smart capital and operational and business
expertise to portfolio companies.
• To facilitate activities of venture capitalists to support small and
medium-sized enterprises (SMEs), we have simplified and shortened the
authorisation process for venture capital managers.
• We have also set up a deal making platform called MATCH, or Meet
[15]
ASEAN's Talents and Champions) , to connect global capital and the
ASEAN enterprise community in 2018. This will help to grow the pipeline
of companies that will eventually require listing in our public markets.
• Singapore also organises the annual Singapore FinTech Festival (SFF)
and this will be combined with the Singapore Week of Innovation and
Technology (SWITCH) that is coming up on the 11-15th November, to
provide a platform for industry players to gain greater understanding of
fintech applications and developments as well as support innovative
solutions to find commercialisation opportunities.
• SGX is also working with licensed private market platforms to facilitate the
listing process for portfolio companies. Such platforms provide PE/VC
managers with opportunities to invest or exit, and provide a pipeline of
companies that could list on SGX. Such private-public markets partnerships
can serve as an engine of growth for our public markets and provide support
for enterprises throughout their corporate lifecycle.
28   In keeping up with changes in our public markets, such as the rise of
neweconomy start-ups and technology firms, exchanges have continued to
innovate to provide product oerings that support the varying needs of these
companies.
• For example, SGX has joined global exchanges in Canada, Europe, and the
US, in introducing the Dual Class Share (DCS) structure to support firms
which have shares with dierent voting rights to raise funds. DCS listings will
broaden the range of investment options for investors and add vibrancy to
Singapore's capital markets and capital markets globally.
29   With the recognition that public markets play an important and key role
in our entrepreneurial ecosystem by providing public financing for growing
companies, MAS will continue to support growth in public equity markets.
• MAS has committed S$75 million over three years to help companies list and
raise equity capital on SGX and support initiatives that broaden and deepen
our research ecosystem. This will help to mitigate the growing and global
phenomena of shrinking research coverage and build up our capabilities in
covering public markets.
Conclusion
30   In conclusion, as we move into a changing world with a less certain global
order, rapidly advancing technology, and increasing threats and opportunities, it
will be even more important for exchanges and clearing houses to keep pace
with global trends and be ready to adapt. This will ensure that you are well-
placed to navigate challenges and remain relevant to the evolving needs of our
financial markets.
31   The WFE, in continuing to advance a collective voice for the improvement of
our public markets, will be an important contributor to global discussions with
regulators on how our public markets are shaped for the future. The WFE's
ongoing eorts in advancing the sustainability agenda for exchanges and
clearing houses, is testament to the leadership and contributions it has
presented since its founding in 1961.
32   I wish you a fruitful general assembly and annual meeting in Singapore.
Thank you.
over 20 years, as cited in the McKinsey Global Institute Study on Outperformers
Maintaining ASEAN Countries' Exceptional Growth Report in 2018.
[4]
Population projections from the UN. The relative market size of ASEAN is cited by the
US-ASEAN Business Council in its growth projections for ASEAN in 2050.
[5]
DBS Bank and the UN Environment, Green Finance Opportunities in ASEAN 2017
[6]
ASEAN Green / Social / Sustainability Bonds / Sukuk for October 2019
[7]
GCIO Sustainability Reporting in ASEAN Research Report 2018
[8]
Nasdaq and Celent July 2018, Global C-Suite Study on Capital Markets Infrastructure
Technology
[9]
Global private equity valuations has grown more than 700% since 2002 in 2017,
outpacing public equity market valuations, McKinsey Global Private Markets Review 2019,
Private markets come of age.
[10]
CFA Institute Nov 2018, Capital Formation: The Evolving Role of Public and Private
Markets
[11]
Wall Street Journal Jan 2018, Fewer Listed Companies: Is That Good or Bad for Stock
Markets?
[12]
Duncan Lamont, Apr 2018, Market views - What is the point of equity market
[13]
McKinsey Global Private Markets Review 2019, Private markets come of age
[14]
CFA Institute Mar 2019, MIFID II Research Unbundling: A Survey Yielding Mixed
Results
[15]
This year, MATCH has been enhanced with a new "Deal Fridays" format, reflecting a
joint partnership with Enterprise Singapore to connect a carefully curated list of growth-
stage ASEAN companies with investors through weekly investor-company match-making
events. Since the launch of "Deal Fridays" in June 2019, over 400 companies and 400
investors have participated in Deal Fridays.