The Singapore Stock Exchange was established in 1973 after the breakup of the Singapore-Malaysia Stock Exchange, and merged with the Singapore International Monetary Exchange in 1999. The government identified the financial sector as a potential growth area, leading to the exchange’s success despite setbacks such as the 1985 and 1987 crashes. The exchange expanded into futures trading and demutualized to become competitive with other world markets. The merger was facilitated by the Merger Act, and the newly formed exchange became the first integrated and demutualized stock exchange in the Asia Pacific region.
The Singapore Stock Exchange was established in 1973 when the Singapore-Malaysia Stock Exchange (SEMS) broke up because the two countries no longer accepted each other’s currencies. The two resulting exchanges were the Singapore Stock Exchange and the Kuala Lumpur Stock Exchange. On December 1, 1999, the Singapore Stock Exchange merged with the Singapore International Monetary Exchange (SIMEX), which traded futures, to become the Singapore Stock Exchange (SGX).
In the 1970s, the Singapore government identified the financial sector as a potential growth area to further strengthen the Singapore economy. The country had a strategic location and a strong, open economy with a well-developed infrastructure. As a result of the government’s fiscally conservative controls, Singapore was the third most prominent Asian financial center in the 1980s, with the financial services industry employing 9 percent of the workforce.
Despite its strengths, in December 1985, the Singapore Stock Exchange crashed. In 1986, the Securities Industry Council was formed to help the government maintain tighter control over securities trading. Competitive and rapidly changing global markets were becoming more difficult to navigate. In October 1987, the stock market suffered another setback when markets around the world simultaneously crashed. It took four more years for the financial markets to recover and regain their former success.
The Singapore Stock Exchange established agreements with the National Association of Securities Dealers of the United States (NASDAQ) to encourage trading between the two markets. Tax incentives and a move toward automating the trading process helped markets continue to recover. The Singapore Stock Exchange began expanding into futures trading through agreements with SIMEX, which had just linked up with the Chicago Mercantile Exchange to facilitate trading.
By 1998, the Singapore Stock Exchange contained 307 listed companies and encompassed $196 billion United States dollars (USD). Global trends towards increased liquidity and demutualization of markets led to the decision to merge with the Singapore International Currency Exchange, which had been trading futures since its establishment in 1984. Prior to demutualization, decision making tended to to favor the interests of the members of the brokers instead of the shareholders in general. . By demutualizing, the newly formed Singapore Stock Exchange would be competitive with other world markets, which had recently relinquished ownership of the stock exchange to shareholders.
To facilitate the merger, the government passed the Merger Act to circumvent the requirement that members had to approve decisions affecting the merger. In addition, the Merger Act gave the Monetary Authority of Singapore (MAS) great power over officers and procedures until the merger was complete. As a result of the merger, the newly formed Singapore Stock Exchange became the first integrated and demutualized stock exchange in the Asia Pacific region, further cementing Singapore’s position as a major Asian financial center.
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