Research and analysis previously available  4 5  To be published as Notice 627. To be published as Notice 628. Similar guidelines will be issued to finance companies and merchant banks. BIS Review 69/2000  2  only at substantial fees to institutions and high net worth individuals are gradually becoming available to online retail investors as well.6 Secondly, the internet offers increased business opportunities and potentially limitless reach. Thirdly, the internet offers increased scope for cross selling financial products. Successful online firms like Charles Schwab and E*Trade are leveraging on their huge customer base to diversify into banking, bill payment and other areas of services.7 Lastly, do-it-yourself finance facilitated by the internet allows institutions to cut whole layers of customer administration costs. The internet is reducing the cost of capital, at the expense of the spreads that intermediaries traditionally enjoyed from a proprietary informational edge. This reduction of what has been called “knowledge float” will benefit both lenders and borrowers. But at the same time, the internet means new challenges. The same borderless nature can mean footloose customers and businesses. Cyberspace so blurs physical distinctions and facilitates convenient access that financial institutions can uproot themselves, go elsewhere, and yet seamlessly offer the same services online. Jurisdictional boundaries become harder to enforce, while new business models potentially raise new operational, strategic and systemic risks. Evolving the infrastructure for electronic finance in capital markets MAS has been closely monitoring these developments and scrutinising their implications for our financial centre.

9  To avoid attracting licensing requirements, analytical tools should operate within the following guidelines: they (a) should not go beyond factual information; (b) should disclose analytical processes transparently and (c) provide sufficient disclaimers to the effect that the tools are for informational purposes, and should not be relied upon as investment advice concerning securities. 5  BIS Review 69/2000  Interpretation of the activities of a dealer Referrals for opening of trading accounts A third principle associated with dealing activity relates to referrals for the opening of trading accounts. MAS will not require the licensing of portals which refer investors to open trading accounts with stockbrokers, provided the stockbrokers themselves are licensed by MAS. This is so, even if the websites offer incentives for account opening. The reason is that trade orders will be handled by licensed dealers supervised by MAS. Passive distribution conduits for advice and dealing Our fourth principle relates to websites acting as what we consider to be passive distribution conduits. Passive conduits, whether for investment advice or for dealing in securities, will not require licensing. Some examples include the following: 1. Hypertext links and reproduction of investment research reports: portals often provide hypertext links to websites of licensed or exempt financial institutions, for example, in advertisements. Or they may reproduce investment research reports from such institutions directly on their own websites.10 Such portals would be considered passive conduits, akin to a newspaper or TV advertisement. 2.