Introduction

SGX was inaugurated on 1 December 1999, following the merger of two established and well-respected financial institutions – the Stock Exchange of Singapore (SES) and the Singapore International Monetary Exchange (SIMEX). At the same time, the exchange was demutualised, ie, converted from a members-only club owned solely by brokers and largely serving their interests - to a commercial, customer-focused organisation.

Historical Overview of SES

The Stock Exchange of Singapore (SES) was incorporated in May 1973 under the Companies Act and licensed under the Securities Industry Act, administered by the Monetary Authority of Singapore (MAS). It had established a reputation in Singapore and internationally as a securities exchange where investor rights were protected and transparency and integrity prevailed.

As at the end of December 1999, over 370 companies were listed on SES, with a total market capitalisation of about S$434 billion. Of these companies, most were listed on the mainboard, while small to medium-sized companies were listed on SESDAQ.


Historical Overview of SIMEX

The Singapore International Monetary Exchange (SIMEX) was launched on 7 September 1984 as Asia’s first financial futures exchange. On the same day, SIMEX co-pioneered the world's first mutual offset trading link with the Chicago Mercantile Exchange (CME).

In 1986, SIMEX introduced the Nikkei 225 futures, the world's first Japan stock index futures contract. The exchange went on to broaden its range of international interest rate, equity and energy derivatives. It soon had the world’s broadest range of Asian derivatives, as well as the region’s broadest range of international derivatives.

SIMEX was named International Exchange of the Year - 1989, 1992, 1993, and 1998 - by the International Financing Review (IFR) and was the only Asian exchange to have ever received this title. In 1999, it was voted Asia's Best Derivatives Exchange by The Asset and assetasia.com, and Derivatives Exchange of the Year 2000 by AsiaRisk magazine.


Rationale for Demutualisation and Merger

The previous structure of both SES and SIMEX were "mutuals", i.e. they were legally owned by their members. Access to the SES was restricted to its 33 members. SIMEX, on the other hand, was owned by the 35 clearing members and access was restricted to them, to the non-clearing members whose numbers was restricted to 472 seats, and to the 147 individual non-clearing members with trading permits.

Increasingly, issuers and investors are migrating to markets that provide the greatest liquidity and best execution. The traditional value of an exchange is being eroded by the proliferation of electronic communications networks (ECNs) which are positioning themselves as virtual exchanges, and providing a single electronic access to multiple markets.

In response to the forces of globalisation and technology, exchanges are liberalising access and deregulating brokerage commissions to maintain their competitiveness. It is in this very fluid environment that exchanges often need to make strategic choices to serve the broader interests of the financial sector, and it is not always possible to align those interests with the member-owners. Demutualisation has allowed SGX to better serve the needs of its customers and end-users.

Further, the decision to merge SES and SIMEX was driven by global trends. The combined entity is able to more closely align the securities and derivatives business strategies, minimise operating costs by sharing overheads and increase its value-positioning vis-à-vis other foreign exchanges.