Singapore's new exchange set to follow foreign trend

The new body is also still short of three division heads, with the final countdown to launch day just begun.

Deputy Prime Minister and monetary authority chairman Lee Hsien Loong announced on Wednesday he had set a target date of December 1 for the new merged exchange to begin operations.

J. Y. Pillay, a former high commissioner to Britain, who has been chairing a committee overseeing the merger, has hinted a foreigner is being sought to inject international experience and fresh ideas.

Recruiting foreign talent has become the rage in Singapore, as its government strives to nurture the republic into a world-class financial services hub. The authorities have realised there just is not enough international experience and creative local talent to go around.

When veteran JP Morgan banker John Olds took over as chief executive and vice-chairman of Development Bank of Singapore last year, he became the first Westerner to head a major government-linked institution since colonial days.

It was the start of a swift new trend.

He was followed by former Hang Seng Bank vice-chairman Alex Au Siu-kee, who took the helm at Oversea-Chinese Banking Corp.

The most recent big-name recruit was Flemming Jacobs, a former partner with the world's largest private shipping company, AP Moller/Maersk, who has taken the helm at debt-laden Neptune Orient Line.

The decision to merge and demutualise the Stock Exchange of Singapore (SES) and Singapore International Monetary Exchange (Simex) similarly stems from a realisation the republic needs to ensure its survival in an ever-more competitive and globalised financial world.

Electronic trading and growing competition has been forcing a trend towards efficiency across the world.

"Singapore's exchanges must now urgently redefine their strategies so as to remain viable and relevant and to serve investors as cheaply and efficiently as technology allows and the competition demands," Mr Lee told parliament this week.

Consolidation and demutualisation was "essential" if Singapore's exchanges were to be able to rapidly respond to the challenges of the modern world, he said.

The new holding company for the merged exchanges, as yet unnamed, will eventually be listed to make its managers more commercially minded.

This is another rising trend. The Australian Stock Exchange, which has already listed itself on its own bourse, has recently been trying to tie up with the Sydney Futures Exchange.

Hong Kong's stock and futures exchanges have been given until September 30 to agree on merger terms under a timetable set out by the SAR Government, and the London and New York stock exchanges have also unveiled demutualisation plans.

SES president Lim Choo Peng and Simex president Ang Swee Tian will stay on after the merger and serve as the new chief executive's right-hand men.

The heads of six divisions have been appointed, two from Simex and four from the SES.

Three others will probably be recruited from outside.

Come December 1, existing shareholders of SES, Simex and its computing arm, Securities Clearing and Computer Services, will have their shares cancelled.

In return, shareholders will receive a fixed dollar amount of shares in the new holding company.

Each SES member will receive S$6 million and each Simex member $170,000 for every seat owned and $115,000 for every share owned.

Existing shareholders would get a total of about $301 million worth of shares in the new company. Remaining shares will be placed out with new investors.

US investment house Merrill Lynch is acting as official adviser.

The share placement with new investors will not be carried out in one go.

While one placement will be completed by the merger date, some shares will be kept for subsequent placement to investors, including future strategic partners.

The monetary authority will police the merged body but has pledged not to shackle the new profit-driven exchange from pursuing business opportunities.

In line with that free market-spirit, Mr Lee this week hinted the government may consider freeing-up brokerage commissions ahead of schedule.

It had been previously agreed this should take place on a phased basis beginning next year, with rates fully freed-up by 2003.