Last week, Magnus Bocker, Chief Executive of Singapore Exchange Limited (SGX: S68), announced that he would not be seeking an extension of his contract with the bourse operator when it comes due in end-June this year. In other words, Bocker would be stepping down from his post as CEO of Singapore Exchange in a number of months. Bocker’s journey with the company can’t exactly be described as smooth. Over the six years in his role as Singapore Exchange’s leader, the company had been focusing on building up its derivatives and commodities trading businesses. Unfortunately, that shift in focus might have…
Last week, Magnus Bocker, Chief Executive of Singapore Exchange Limited (SGX: S68), announced that he would not be seeking an extension of his contract with the bourse operator when it comes due in end-June this year.
In other words, Bocker would be stepping down from his post as CEO of Singapore Exchange in a number of months.
Bocker’s journey with the company can’t exactly be described as smooth.
Over the six years in his role as Singapore Exchange’s leader, the company had been focusing on building up its derivatives and commodities trading businesses. Unfortunately, that shift in focus might have also distracted the company from its business of running Singapore’s stock exchanges. As Goh Eng Yeow from The Straits Times wrote in November 2014:
“Average daily stock market turnover for the first 10 months this year fell 29.8 per cent to $1.06 billion from the same period last year. It was also only 44 per cent of 2007’s daily average turnover of $2.39 billion.”
In addition to a decline in trading volume, Singapore Exchange had also arguably slipped in its regulatory standards.
For instance, back in 2013, the exchange was slow to respond to the penny stock saga involving Blumont Group Ltd (SGX: A33), Asiasons Capital Limited (SGX: 5ET) and LionGold Corp Ltd (SGX: A78) where more than S$8 billion in total market value were wiped off the three shares in a matter of days. Their massive crash had happened after their shares had experienced rapid increases in price.
There were criticisms in some corners that Singapore Exchange did not do enough to control the speculation that happened with the shares of the aforementioned trio even as many brokerage firms were already imposing trading limits internally for those counters.
This leads to questions about the inherent and possible conflict of interests between being the operator of the market and its regulator.
The incident with the penny stocks had happened after a number of scandals involving S-chips (China-based companies listed in Singapore) had occurred in earlier years during and following the financial crisis. These developments may understandably have caused investors to lose some confidence in the integrity of the stock market here.
Warren Buffett once said that “It takes 20 years to build a reputation and 5 minutes to ruin it” and that he would be understanding if his managers lost money but would be ruthless if they lose any reputation for his company. With what we’ve seen so far, Singapore Exchange might have been chasing profit in expense of some of its reputation.
So, what’s next for Singapore Exchange after June this year when Bocker steps down?
The next CEO might need to do some serious work on strengthening the reputation of the exchange. There might also be a need to think about separating the company’s regulatory obligations from its operational obligations.
Fortunately, there are still bright spots in Singapore Exchange’s business. Singapore is still the regional financial hub of Southeast Asia and many regional companies still prefer to list here over their home markets where their respective exchanges might be much smaller in size.
Thus, there is a good chance for Singapore Exchange to regain its reputation, improve the confidence of investors in the market, and come out stronger in the future.
But to see these happen, the new CEO of Singapore Exchange has to understand the importance that reputation brings to the business of an exchange operator. Singapore Exchange is currently searching for its new leader – investors would have to wait and see.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Stanley Lim doesn't own shares in any company mentioned.