New remisiers may get easier entry into industry

Another key proposal put forth by SGX yesterday would give remisiers and dealers more leeway to operate away from their desks. Brokerages would no longer be required to obtain written customer consent each time a trading representative starts mobile
Another key proposal put forth by SGX yesterday would give remisiers and dealers more leeway to operate away from their desks. Brokerages would no longer be required to obtain written customer consent each time a trading representative starts mobile broking.ST FILE PHOTO

Axing minimum security deposit among changes put forth by SGX

The minimum requirement for remisiers to furnish a $30,000 banker's guarantee to broking houses before they can do business may be axed in a bid to encourage more people to join the industry.

The change would give brokerages full flexibility to set the amount of security deposit required of a remisier after conducting a credit assessment.

Another key proposal put forth by the Singapore Exchange (SGX) yesterday would give remisiers and dealers more leeway to operate away from their desks. Brokerages would no longer be required to obtain written customer consent each time a trading representative starts mobile broking.

Mr Tan Boon Gin, chief executive of SGX RegCo, the bourse's regulatory unit, said: "We are trying to move from a very prescriptive approach to a more principles-based approach, to give the broking houses more freedom to take risk management into their own hands."

Market players approached by The Straits Times said the SGX is heading in the right direction, although some questioned if these small steps could really move the needle.

For instance, the SGX hopes that younger remisiers who have less business and can put up only a smaller deposit will find it easier to do business once the minimum deposit requirement is removed.

One senior dealer said: "Knowing the broking house management, my expectation is that it would be cautious. If you're a new entrant, why would I give you a free hand? Nobody would give you a big line (of credit) without some understanding of your clientele.

CAUTIOUS APPROACH

If you're a new entrant, why would I give you a free hand? Nobody would give you a big line (of credit) without some understanding of your clientele.

A SENIOR DEALER, who added that anyone coming into the industry right now must come in with a good client pool.

"The value-add from new entrants would be very limited. The industry has shrunk. My impression is that many dealers and remisiers are just doing their own trades, not many are servicing clients. Anyone coming into the industry right now must come in with a good client pool."

At the end of last year, 1,097 dealers and 2,355 remisiers were active in the Singapore market, down from a high of 1,333 dealers and 3,032 remisiers in 2011. Unlike dealers who are brokerage employees, remisiers are self-employed and earn a living off commissions.

Mr Jimmy Ho, president of the Society of Remisiers, said removing the minimum security deposit requirement "sounds good... but just because SGX has removed the requirement doesn't mean the houses will. They have the liberty to do what is required to shed their credit risk".

Yet, market volumes have died down, and $10,000 is a more reasonable deposit size that could be used as a guide, Mr Ho said.

But he welcomed the steps to make mobile broking more user-friendly: "Most clients will not bother to reply to a notification after reading it. As we move towards technology, it's essential that in-house remisiers and off-premises remisiers are seen as providing the same level and quality of service."

Other proposed changes would also clarify market practices in areas such as error trades and SGX investigations. Remisiers and dealers engaging in their own business activities outside of trading, such as tuition services or fund management, for instance, would no longer require SGX oversight.

Mr Jeffery Goh, executive director of Phillip Securities, said: "Every small progressive change to encourage new growth in the industry should be embraced."

The SGX is seeking public feedback on the proposed changes, with consultation open till Nov 7.

A version of this article appeared in the print edition of The Straits Times on October 11, 2017, with the headline 'New remisiers may get easier entry into industry'. Print Edition | Subscribe