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The Stock Exchange of Singapore was established in 1973 when the Stock Exchange of Malaysia and Singapore (SEMS) broke down because the two countries no longer accepted each other’s currencies. The two resulting exchanges were the Stock Exchange of Singapore and the Kuala Lumpur Stock Exchange. On 1 December 1999, the Stock Exchange of Singapore merged with Singapore International Monetary Exchange (SIMEX), which traded futures, to become the Singapore Exchange (SGX).
In the 1970s, the Singapore government identified the financial sector as a potential area of growth 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 by the 1980s, with the financial services industry employing 9 percent of the labor force.
Despite its strengths, in December of 1985, the Stock Exchange of Singapore crashed. In 1986, the Securities Industry Council was formed to help the government maintain tighter control over securities trading. Competitive, quickly-changing global markets were becoming more difficult to navigate. In October 1987, the stock exchange suffered another setback when markets around the world collapsed simultaneously. It took four more years before financial markets recovered and regained their previous success.
The Stock Exchange of Singapore established agreements with the United States’ National Association of Securities Dealers (NASDAQ) to encourage trading between the two markets. Tax incentives and a move toward automation of the trading process helped the markets continue to recover. The Stock Exchange of Singapore began to expand into futures trading through dealings 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 US Dollars (USD). Global trends toward increasing liquidity and demutualization of markets led to the decision to merge with the Singapore International Monetary Exchange, which had been trading futures since its establishment in 1984. Before demutualization, decision-making tended to favor broker member interests instead of shareholders at large. By demutualizing, the newly formed Singapore Exchange would be competitive with other world markets, which had recently given over ownership of the exchange to shareholders.
To facilitate the merger, the government passed the Merger Act to bypass the requirement that members had to approve the decisions affecting the merger. In addition, the Merger Act gave the Monetary Authority of Singapore (MAS) a great deal of power over officials and procedures until the merger was complete. As a result of the merger, the newly formed Singapore Stock Exchange became the first integrated, demutualized stock exchange in the Asia Pacific region, further solidifying Singapore’s position as a major Asian financial center.
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