Are public consultation papers useful?
Vincent Khoo
Letter to Editor, Business Times
08 November 2013
Letter to Editor, Business Times
08 November 2013
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Vincent Khoo
Letter to Editor, Business Times
08 November 2013
R SIVANITHY has called for Singapore Exchange (SGX) to circulate a public consultation paper (PCP) on high-frequency trading (HFT) before it is implemented (“SGX should consult public on HFT”, BT, Oct 5).
It is a reasonable request which SGX will probably oblige in due course, as it seems to be the standard operating procedure for SGX to follow whenever it wants to introduce some radical changes or innovations.
Yet, in reality, PCP seems just a formality, to give SGX a veneer of consultative legitimacy, a semblance of non-bureaucratic decision. In theory, PCP is a laudable invention, giving an avenue to the public to air their views, suggestions and grouses; in practice, the perception is that most of the suggestions are given only lip service. When SGX has made its proclamation, it more or less has made up its mind on what it wants to do.
SGX is a listed entity; it is also a “regulator” but public perception is that it looks after its commercial interests before its regulatory obligations. Hence, the call for the Monetary Authority of Singapore to set up an independent regulatory body for the financial services sector, like for other jurisdictions.
Some countries even have an independent body to vet and authorise new products before they are introduced, to ensure these are suitable for their markets. It should not be SGX’s authority to introduce new processes and/or products without independent evaluation and validation.
In his article, Mr Sivanithy has mentioned the cancelled lunch break. There were private consultations with vested parties, and a public consultation paper was issued prior to its implementation. Yet, in spite of many valid arguments for the status quo, and even with the Hong Kong Stock Exchange not going all the way with zero lunch break, SGX went ahead and implemented no lunch break anyway.
This is still a sore point with many remisiers and The Society of Remisiers (Singapore). SGX could have heeded the views expressed in the PCP, and maybe go with a reduced lunch break first, but no, it must go with its original plan of no lunch break. It had already made up its mind long before the PCP was issued.
However, not everything needs to be done with a PCP. Some issues are so simple and easy to implement that it is ludicrous to have a PCP. It only delays the whole process. For example, the issue of reducing the board lot to 100 shares and ultimately to one share.
Most exchanges have already implemented these already; Bursa Malaysia’s board lot is 100, the New York Stock Exchange’s is one share. These foreign bourses have already done the impossible. Why is it so complicated or difficult for SGX to just reduce the board lot down to unit share straightaway?
As has already been aired in many articles and letters to the press, the advantages are many; the disadvantages are imaginary. In this day and age of information technology, it is an anachronism to still insist that we trade in lots of 1,000 shares. With trading in lots of one share, the unit share market can be totally disbanded. This can be done tomorrow, not months and years down the road.
As the article points out, HFT is a new way of trading. Most players here have neither knowledge nor experience of it. So, a PCP will have limited inputs and of limited use. Other than HFT players (who probably will be pro-HFT), who else can credibly speak out against it? SGX has publicly announced it will introduce HFT after circuit breakers are in place, so SGX will definitely push HFT through, PCP or no PCP.
Right now, many remisiers are very tired and stressed out from working non-stop from 8.30am to 5pm. With HFT, they will be doubly tired and doubly stressed, with watching the numbers flashing by at high frequencies. Computers do not get tired; remisiers do.