Taking care of a stock exchange is no easy feat. It takes humility, strength and amusing life principles from certain animal groups to help navigate through challenging times. Wei-Shen Wong sits down with SGX CEO Boon Chye Loh to learn about those principles and how SGX is looking to expand. Photographs by Gideon Lim
Boon Chye Loh lights up as he describes how watching impala behave in the wild is applicable to real-life situations. Impala are one of the most common antelope found in Eastern and Southern Africa. “They tend to move in big numbers and you can observe the way they look around their surroundings. They have 360 degrees covered,” explains the CEO of the Singapore Exchange (SGX). “Each one knows which direction they are looking in—that’s teamwork because they are the easiest prey in the bush. It is the same with lions. When the lions are at a junction, it’s the way they lay themselves out even though they are the king of the jungle,” he says.
Loh—whose favorite animal in the wild is the cheetah—loves safari excursions. He is often teased by his four children about his affinity for the bush because he returns home with what they refer to as “bush principles.”
“As you immerse yourself in the bush, trekking and watching animals and seeing how animals react, you can form principles that are applicable to life and to business,” he says.
He adds that he now has at least 100 principles, which he hopes to publish in a book one day. His hopes for that however, have now been dampened by his own wife. “My wife recently bought me a book—Jungle Business Management: Lessons from the African Bush, written by Gert Cruywagen—and said to me, ‘Look, someone has done this already,’—what an encouragement!” he says, filling the biggest meeting room at the exchange with laughter.
Every time he goes out on a safari, he tries to bring back between 10 and 30 principles. “It’s amazing to see how animals interact and then apply it to business,” he adds. Loh travels to Africa once or twice a year. So far he has visited South Africa, Botswana and Zimbabwe. Each time he aims to bring something back to help him and his company.
The Start of Something
Come July 14, 2017, Loh will mark his second anniversary at the exchange. An engineering graduate of the National University of Singapore, he started his career in finance at the island nation’s central bank, the Monetary Authority of Singapore (MAS), in 1989. He says that during his time in school, most students pursued a science, engineering or mathematics degree. So he became one of those who went down the science track and ended up in engineering. Although he liked it, he enjoyed research a little bit more. However, there were not many interesting research areas to work in at the time he graduated.
And so, in a sense, he was back to square one. How would he utilize his degree? Then he considered finance and thought it was an untapped field. But more importantly, Loh recalls, he asked himself what kind of role he would enjoy most. It’s not the easiest question for a 20-something-year-old to answer with absolute certainty. Loh thought, though, that since he followed global affairs and liked learning about what’s going on in the world, finance suited him well. What better way to immerse oneself in finance than by monitoring it as a regulator?
In his 20s, he had an idea of what finance was about, but not the entire picture. To the young Loh, finance equaled banking, which equaled lending and borrowing. That’s what he knew but he soon learned that it was not quite that straightforward. “There are obviously many areas of finance that continually evolve, so it was an interesting journey,” he jokes. “I did enjoy—and still enjoy—finance, and with my current role at the exchange, I’m right in the middle of finance and capital markets.”
After a three-year stint at MAS, he left in 1992. It was time to get experience inside one of those firms he was overseeing to see how they conducted business. He first went to Morgan Guaranty Trust, the Asian outfit of investment bank JPMorgan in Singapore, for three years before moving to Deutsche Bank. It was a time when banks from the US and UK started extending their reach to emerging markets. Loh was a believer that markets in Asia, given the demographics, had to evolve. “It was still very much a banking market, and there wasn’t much capital markets development,” he says. “I felt that any institution that wanted to do that well probably needed to have a good and wide presence in Asia, and Deutsche Bank provided that platform. That’s where I spent the bulk of my banking career, working with colleagues and market professionals in understanding and developing the Asian financial markets.”
A New Beginning with Challenges
Loh spent the best part of two decades at Deutsche Bank, rising to the head of its Corporate and Investment Bank (CIB) for Asia-Pacific. After a brief stint at Bank of America—and always looking for a challenge—a big opportunity presented itself: “Why not take a front-seat role?” he recalls thinking. While at Deutsche Bank, Loh was also a member of SGX’s board, serving from 2004 to 2012. In February 2015, it was announced that then-CEO Magnus Bocker would not look to renew his contract when it ran out at the end of June in the face of lagging volumes and an embarrassing penny-stock crash. Loh’s opportunity had arrived. “It was during challenging times,” he recalls. “Volumes were down, markets were volatile, and the exchange had gone through a period of adjustment. Being in the financial industry for a long time, I felt it was an opportunity to work with a group of talented people and stakeholders to see how we could take the market forward.”
Two years in, Loh says he is building on his colleagues’ successes. He denies any accomplishments achieved on his own, but rather points out that a lot of the work has been achieved by his colleagues and highlights that it is all about the team effort.
Although Singapore is a tiny island nation with a population of 5.5 million, almost 40 percent of the companies listed on SGX are from outside the country, while 75 percent of the bond listings are also from foreign companies. SGX has built a reputation as being a truly international exchange, although this is not something that happened overnight, Loh stresses. “It has been worked on by my colleagues and the team over the years,” he says. For example, under SGX’s derivatives business, the exchange is the only offshore access for any investors wanting to hedge exposure or risk-managed exposure to China and India. And for its equities business, SGX is not only well-known in the real estate investment-trust sector, but also for consumer, infrastructure and healthcare listings.
The Tech Challenge
SGX continues to innovate and upgrade its technology. It launched its derivatives trading engine in November last year, providing almost 22 hours of continuous trading. Loh feels it is important for SGX to develop more asset classes in order to become a multi-asset exchange, allowing it to diversify its revenue streams. Apart from equities, equity derivatives and commodities, SGX is building its currency and fixed-income portfolios.
“For currencies, I feel that Singapore, being the largest foreign exchange center in Asia, is possibly an area where we can—and should—see quicker development. Whereas with fixed income, being essentially an over-the-counter (OTC) product may take a little bit more time in terms of gaining traction,” he says. “We launched our bond trading platform about nine months ago and that will take a bit more time as we are trying to convert OTC into a trading platform.”
Loh adds that participants’ adoption and initial volumes are within expectations. “If you look at how some of the other platforms have done, I think we are tracking well compared to what they were when they were launching, but changing behavior from an OTC to electronic platform takes a bit of a shift, unlike foreign exchange, which is a very large and liquid market.”
Loh is also overseeing the exchange’s migration onto a new post-trade system, which has been developed in partnership with industry participants. He says the exchange is also moving into a new datacenter. It currently has two datacenters and will migrate into the newer one.
The Titan OTC platform, another IT project Loh is overseeing, is aimed at bettering OTC workflow. “Today, some of the products are traded OTC—like commodities such as iron ore—but are cleared centrally through our exchange. Some of these are traded on-screen, but large parts are traded OTC. We believe that in the OTC markets, one needs to have an efficient workflow process so that participants can seamlessly see prices, get the information they need, are able to transact either OTC or in the interdealer-broker market, and are also able to seamlessly register the trade for clearing and then see post-trade all the necessary information,” Loh says. This will create transparency and efficiency, he adds.
Preventing Future Outages
Loh’s first year at SGX was tainted by a technical glitch, forcing the exchange to cease trading on July 14, 2016. The cause was a disk failure and an application that did not detect the problem. The disruption resulted in trade reconciliation and confirmation problems. SGX ceased trading at 11:38 a.m. local time and didn’t reopen that day. IT detected input/output errors on a disk that runs the application that sends out clearing confirmation messages to members. Due to the disk failure, some clearing confirmation messages were not generated. SGX had to manually initiate a cutover to its secondary systems, following attempts by the application to resend the missed messages, which then resulted in some of them being duplicated. IT replaced the disk that day and conducted health checks with members prior to opening the following day.
“In a way, it was like an anniversary present,” Loh says with a smile. “It clearly was a memorable date for us to encounter a data reconciliation challenge. The trading system continued to function at that point in time but we could not continue trading because position reconciliation had to be done and different participants had different states of readiness.”
This is not the first time SGX has experienced an outage during a trading day. Back in 2014, it encountered two disruptions, the first on November 5, 2014, caused by a power supply issue that saw market participants disconnected at 2:18 p.m. before SGX declared a formal trading halt at 2:51 p.m. The exchange was able to reconnect at 4:45 p.m. and trading for both securities and derivatives that day was extended. The second occurred on December 3, 2014, due to a software defect that delayed the opening of the exchange’s securities market from 9 a.m. to 12:30 p.m.
In September last year, SGX convened an industry working group to discuss what went wrong and how these type of events can be prevented in the future. The group has finished its findings and has made six recommendations, three of which have already been implemented. The remaining three will be worked on together with the industry.
Loh says the exchange frequently carries out exercises to test readiness with participants, including every weekend—which he calls a “green zone”—when the market is closed. “As an industry, we come together with either specific or industry-wide testing two to three times a year, although bilaterally or with smaller groups, we do that all the time,” he says.
Loh says the key is to minimize top-down implementations to the industry in terms of upgrades to SGX’s technology. For example, in its current migration to its new post-trade system, the exchange has opted for an open platform to allow participants or brokers to interact with it via application programing interfaces (APIs) rather than developing a system and forcing the industry to adopt it. “I think the brokers or participants should have the flexibility as to the choice of what they want to use,” Loh says. “And it is important for us to provide a platform that can cater to as much of the connectivity as possible, while obviously adhering to our standards of security.”
Following the 2016 market disruption, at the end of March this year, SGX was scolded by the MAS—Loh’s old employer—for failing to restore its systems within the required four hours. MAS directed SGX to implement measures within 24 months to enhance its recovery processes and operational resiliency. It will contribute S$1.5 million ($1.07 million) to co-fund the costs that may be incurred by brokers. Loh says SGX has since formed an industry working group, identifying several areas to work on, including restoring corrupt data, market recovery processes, and incident communication. “MAS also noted that while we met the objectives of maintaining a fair, orderly and transparent market, we did not have the market open up and running within the stipulated time, which is what they have asked us to work on together with the industry,” he says.
Pressure from regulators and the investment world watching every move is not something that sits easily with most people. Loh says he runs to deal with the weight of it all. “Running is the best form of de-stressing. I get on the treadmill and keep running. When I go really depends on my schedule—it could be early in the morning, or it could be late into the evening. It really depends on the day, but the key is to find the time to do it. One has to be disciplined. So far I have been able to find the time needed, which is important.”
Although Loh has had many colleagues throughout his career who have helped him along the way, he sees his wife as his compass and the person who provides him with a sense of balance. “She gives me a very different perspective on things and life,” he says. “When you are faced with a difficult or stressful decision, people who are less close to your business—whether it’s your wife or anyone else in your life—tend to have a slightly different view, which sometimes you might not see. I think those are important moments in terms of mentorship because sometimes we can be so absorbed by the way we are trying to look at a particular issue that we forget that there are other ways of looking at it.”
Despite his tight schedule, he tries to spend his free time with his wife. He says that among their close friends, he and his wife are known to spend Friday evening dinners together. Sometimes, when work does not permit it, they still manage to have some quiet time together at least once a week.
The couple has four children, ranging from the ages of 14 to 21, all of whom currently study abroad, and apart from seeing them during school breaks, he FaceTimes them.
Loh is driven by constant innovation and relevance, and these are among the things that motivate him to wake up in the morning. He tells of the time, back in 1986, when the SGX launched Nikkei futures. “We were the first to do that when Japan didn’t even have the product. Today, Japan has that contract too; we were 100 percent of the market 31 years ago. Today, we are about 20 percent of the market, but the absolute volume is bigger than what it was 31 years ago. The point there is that we have to keep innovating,” he says.
The competition catching up is what keeps Loh awake at night. “Relevance drives innovation,” he says.
Boon Chye Loh Fundamental Data
Name: Boon Chye Loh
Title: CEO, Singapore Exchange Ltd.
Education: Bachelor’s Degree in Engineering, National University of Singapore
Hobbies/Interests: Gym, tennis, travelling for leisure, photography, reading, collecting red wine
Greatest Business Success: “That’s not for me to judge.”
Lesson Learned: “Early on in my career, when I was on the trading floor, I lost my temper at a colleague. You know those moments you see on TV when people bang on their phones and smash their screens? It wasn’t as bad as that,” he jokes. “That’s where I learned to interact and better behave and control my emotions. I learned to put myself at the other side of the equation. What if I was that person? Always think about the other person.”
Should regulators take a more active role when it comes to AI oversight, or leave it to the professionals? What will M&A look like in 2018?Subscribe to Weekly Wrap emails