Good morning to our friends at the Monetary Authority of Singapore, our distinguished guests from fellow SROs, exchanges and regulators visiting Singapore, ladies and gentlemen.

Markets are complex, often fast-moving, organisms. SROs function within this state of affairs and it therefore behoves us every so often to reflect on what has been achieved, what more needs to be done (and there is always something that needs improvement) and what more we should be expecting.

When I reflect on the challenges SROs face, I see these as falling into 3 main buckets:

First, in what I call the trust bucket, the issues include how independent the SRO is, potential conflicts of interest and how they are managed, the demand for transparency and how it is addressed, and investor protection. These are perennial issues which means that SROs probably already have many of the levers in place to strike the balance that enables marketplaces to thrive. Still, these trust factors are fundamental to the continued relevance of SROs, which is why such matters will be raised throughout today's discussion. 

Second, is what I call the complexity issues. When Apple released its smartphone in 2007, it was a revolutionary device, being the first to target the mass market using a large touchscreen allowing finger input as the main means of interaction. Some 17 years later, the form factor for smartphones is still recognizable from the iPhone of 2007, but the software and hardware have become more complex as functionalities have increased exponentially. Markets are similar. SROs today operate in increasingly complex worlds. For one, products are getting ever more complex. Markets also involve many agents who do not necessarily operate on a level playing field with other actors. There is also greater interconnectivity between more and more markets such that changes in one market can affect others, making an understanding of such interconnectivity important. Politics and international affairs are yet additional elements that can disrupt the best laid plans.

Third are the swift changes that are sweeping across the financial industry. Technology is one of the most oft-quoted changes. Artificial intelligence, or AI, is of course top of mind at many companies: how to harness it and yet be mindful of limitations and risks, how to ensure our staff are ready for it, how to repurpose processes for or because of it, and how to prevent malfeasance perpetrated with the use of AI tools. Other aspects of technological change are also rapid, including the rise of fintech and digital assets, with the risks that come with them such as ransomware, malware and data loss, all of which demand that SROs stay ahead with their understanding of technology. This includes monitoring and regulating new financial products and services. And then, there are also unpredictable events that require quick responses such as COVID and the Great Financial Crisis. 

How have SROs fared amid these challenges and are they even relevant today?

I would argue that most SROs have been resilient enough to acquit themselves well despite events such as the Great Financial Crisis and COVID. There is no denying that both the GFC and the pandemic posed challenges and changed the world in significant ways beyond the markets in the case of the GFC, and beyond the medical situation in the case of COVID, to the wider economic and social environment. Yet SROs were able to carry out their duties and responsibilities, albeit perhaps with some difficulty initially, but we soldiered on and ultimately, delivered on what was expected of us. And this was only possible because of three characteristics that speak to the strength of SROs.

First is the closeness of SROs to the market. In many cases, SROs have members that are market participants. This enables the SRO to deeply understand market developments, benefit from a constant flow of feedback and engagement, and work together with its members. A good example of this is how during COVID, our members raised concerns about the impact of lockdowns on their operations and their ability to comply with requirements such as inspections. The solution was to transition to virtual inspections and we were able to do this without disrupting activities too much.

Second is that SROs also work closely with the ultimate regulator and lawmakers in their ordinary course of business. During COVID, in the Singapore and SGX Regulatory context, we collaborated with the MAS and the various ministries such as the Finance Ministry and Law Ministry to very quickly enable, for instance, temporary changes in legislation governing the conduct of shareholder meetings and the conveyance of documents to shareholders. Because our various teams were well-apprised of each other's operating framework, the process was very smooth despite the circumstances we were operating in.

Finally, our strong relationship with our members and our regulators enables us to achieve some degree of regulatory flexibility and a highly efficient time-to-market. In Singapore during  COVID, this was demonstrated with the flexibility in member inspections (as I mentioned earlier) and extensions of deadlines for AGMs, both of which involved changes in processes, market-wide communication and specific direct engagement. And all these were achieved in quick order under very difficult circumstances. We also provided regular guidance to member participants and our listed issuers on how to handle disclosure of problems arising from COVID-related circumstances.

Conclusion

While many SROs have performed their role well, one fundamental matter we need to keep front and center is what I term the ‘Goldilocks paradigm’. Human beings constantly strive for balance. This is reflected in many religions and philosophies. For example, in Buddhism it is represented by aspects such as the Middle Way and the yin and yang symbol. In Christianity it is about being guided by God’s message and not by one’s personal passions alone. Similarly, SROs must strive to co-create systems and processes that are “just right”. Too much regulation risks stifling markets and too little risks bringing markets into disrepute. In other words, we don’t want what we are doing to be too hot or too cold.

While often judgement will have to be exercised with imperfect knowledge, we hope that it will not take multiple attempts before we discover what is “just right” (as Goldilocks did before finding the solution in the last possibility left). I often ask myself if there is anything we can do to solve the Goldilocks problem. To some extent, I believe I have one important part of the answer. It is to be humble. Only by understanding that we have limitations can we have the attributes to maximize our effectiveness, such as being open to different perspectives, even criticism; the ability to engage in meaningful self-reflection; and a bit of positive paranoia. SROs aren’t perfect; we will make mistakes. But genuine humility can minimize our mistakes and optimize our time to market when we have made mistakes. It is my hope that today’s discussions and presentations will provide us with suggestions and opportunities that will among other things reveal our weaknesses and biases, the better with which to shape our future thinking towards higher standards and quality. On this note, thank you for having me this morning and I wish all of you a productive day ahead.