Lim Hng Kiang: Dynamism, confidence, collaboration - regional exchanges in the new financial landscape Keynote address by Mr Lim Hng Kiang, Minister, Prime Minister’s Office, Second Minster for Finance and Deputy Chairman of the Monetary Authority of Singapore, at 23rd East Asian and Oceanian Stock Exchanges Federation (EAOSEF) General Assembly, Singapore, 15 April 2004. *  *  *  Mr JY Pillay, Chairman, EAOSEF and Chairman, SGX Mr Toshitsugu Shimizu, Secretary General, EAOSEF Dr Yu-Kyung Kim, Chairman, EAOSEF Working Committee Distinguished guests, ladies and gentlemen  Introduction A warm welcome to everyone, especially to many of you who have travelled to join us here in Singapore. I understand that the EAOSEF General Assembly was previously hosted by Singapore in 1988. Today, we meet here again, but amidst a global setting that has changed significantly. The world is quite different today. Economies and markets alike, are increasingly intertwined. Globalisation of markets and rapid advances in technology have altered the global marketplace. This is especially so in the world of exchanges and clearing houses, where the competitive landscape is changing rapidly worldwide. Challenges facing exchanges The late 1990s saw a flurry of mergers, alliances and demutualisation among leading exchanges. They were gearing up for a battle with the alternative trading systems. But the threat from alternative trading systems did not materialise. No established exchange has been supplanted. Even in the U.S., which has the highest number of alternative trading systems, none have made significant inroads into the dominance of established exchanges.

This will ultimately enhance the liquidity of our markets. Recognising the potential benefits of establishing linkages, the ASEAN Finance Ministers have recently agreed to explore ways to forge alliances within the ASEAN securities markets. Forging successful exchange linkages is, however, not without its challenges. But these are not insurmountable. Let me briefly outline three of them. Firstly, exchanges’ technology and infrastructure will have to be updated and enhanced to cater to an increasingly integrated marketplace and a more sophisticated investor base. There is a need to ensure that the various IT infrastructures are interoperable and scalable, so as to allow partner exchanges to share common platforms and reap the benefits of economies of scale. Secondly, greater harmonisation of standards and regulatory requirements is a prerequisite for deeper linkages and alliances amongst the regional exchanges. Some regional exchanges and regulators have made a start by committing to work together under various MOUs. We should take the next step of looking at other initiatives to bring about greater convergence of standards in corporate governance, trading conventions, rules and regulations. Finally, the success of exchange linkages is highly dependent on investors’ interest in cross-border trades via the linkages. To achieve this, the linkages must provide a cost efficient solution for investors’ trading needs. There is also a need to cultivate Asian investors’ interest in cross-border investments. Asian investors’ investment portfolios traditionally reflect a strong home bias.