Exchanges (Demutualisation and Merger) (Amendment) Bill

Order for Second Reading read.

3.33 pm

The Minister of State for Trade and Industry (Mr Alvin Tan) (for the Prime Minister): Mr Speaker, Sir, on behalf of the Prime Minister, I beg to move, "That the Bill be now read a Second time".

In 1999, the Exchanges (Demutualisation and Merger) Act (EDMA) was passed to facilitate the transfer of ownership of the Stock Exchange of Singapore (SES), the Singapore International Monetary Exchange (SIMEX) and the Securities Clearing and Computer Services (SCCS), to an integrated exchange, Singapore Exchange Ltd (SGX). The exchanges were demutualised and merged into a single non-member run entity. The essential aim was to put the integrated exchange in a stronger position to hold its own internationally and develop new growth opportunities.

Through this demutualisation process, members of the two exchanges, SES and SIMEX, received a fixed dollar amount of shares in SGX and the remaining SGX shares were issued to SEL Holdings Pte Ltd (SEL), a special purpose company designated under the EDMA. SEL placed out some of the SGX shares to new investors and retained the rest.

This portion of SGX shares that SEL retained, which I shall refer to as the "Original SGX shares", are currently held by SEL for the benefit of the Financial Sector Development Fund (FSDF). MAS set up FSDF in 1999 to support the development of Singapore as a financial centre. FSDF is controlled and administered by MAS, subject to the directions of the Minister-in-charge of MAS. The dividends and any proceeds in respect of the Original SGX Shares are channelled towards the FSDF to fund financial sector development initiatives in Singapore. These include initiatives which develop sector-wide capabilities and infrastructure, promote financial innovation, upgrade skills and expertise, and support financial education.

It should be highlighted that under the EDMA, SEL is not able to exercise or control the exercise of the voting rights attached to the SGX shares. This feature remains unchanged in the proposed amendments to the EDMA. This is important because it is not intended for MAS, in its capacity as FSDF’s administrator, to impinge on SGX’s capacity to make business decisions. This safeguard further enables MAS to play the roles as SGX's regulator and FSDF's administrator without conflict of interest.

SGX announced on 5 August 2021 that it would be implementing a scrip dividend scheme (SDS) to offer its shareholders the option to receive all or part of their dividend entitlement in SGX shares. SGX has explained that this scheme would allow shareholders to re-invest their cash dividends in SGX’s medium-term growth journey.

Currently, the EDMA allows SEL to receive new SGX shares where there is no election or choice on the part of the shareholders, such as when bonus shares are issued. However, it does not allow SEL the flexibility to elect to receive new SGX shares when these arise from corporate actions taken by SGX, such as scrip dividend schemes. Amending the EDMA will give SEL flexibility to elect to receive new SGX shares arising from SGX's corporate actions, where doing so is in line with FSDF’s interests.

Mr Speaker, Sir, I will now go through the broad areas of amendments in the Bill.

The Bill will allow SEL, with the Minister-in-charge's approval, to participate in SGX's corporate actions under which SEL may opt to receive additional SGX shares. For instance, SEL could elect to receive scrip dividends in SGX scrip dividend scheme (SDS), which it is unable to under the current EDMA.

The Bill will also provide that SGX shares acquired through such participation will be treated in the same manner as the Original SGX shares. In particular, consistent with the Original SGX shares: one, SEL will hold the new SGX shares for the benefit of the FSDF; two, SEL will not be allowed to transact with the new SGX shares without the prior approval of or direction from the Minister-in-charge of MAS; three, SEL will not be able to exercise the voting rights attached to the new SGX shares; and four, the dividends paid in respect of the new SGX shares and any proceeds in respect of any sale of the new SGX shares, less expenses incurred in the sale of the new SGX shares, will accrue to the FSDF.

Mr Speaker, Sir, this Bill does not alter the basic objective of the Act, or SEL's purpose of supporting the FSDF. It only enables SEL to participate in corporate actions taken by SGX under which SEL may elect to receive new SGX shares. The new SGX shares will be treated the same way as the Original SGX shares. Mr Speaker, Sir, I beg to move.

Question proposed.

Mr Speaker: Mr Liang Eng Hwa.

3.40 pm

Mr Liang Eng Hwa (Bukit Panjang): Mr Speaker, Sir, I support the intent of this Bill, which is to enable SEL Holdings, as shareholder of SGX, to participate in corporate actions of the company such as receiving new shares as dividends.

It is logical, as that is the ownership rights of any shareholders of a listed company. However, what interest me on this Bill is the structure in which the shares of SGX are being held and how dividends are used to fund FSDF to support various initiatives set out in the MAS Act.

The EDMA came about because of the demutualisation and merger of the Stock Exchange of Singapore, SIMEX and SCCS. SEL is a special purpose vehicle designated to hold the SGX shares, specifically for the benefit of FSDF. And FSDF is set up to support the promotion of Singapore as a financial centre and is controlled and administered by MAS; subject to the directions of the Minister-in-charge of MAS.

Notwithstanding, Sir, I have a couple of questions for the Minister:

I can understand the historical context of this arrangement. But I want to ask the Minister of State if MAS still sees the continued need for SEL to be the largest shareholder of SGX; and as a result, the holdings of SGX shares would constitute a significant part of the investment for FSDF? Would FSDF be being better served with a more diversified portfolio and its interest to SGX reduced?

Secondly, may I use this opportunity of the Second Reading to ask the Minister of State also to share on the governance structure of FSDF; and also how often are the objectives, scope and outcomes of FSDF reviewed?

I thank the FSDF for being proactive in responding to the pandemic by launching the $125 million COVID-19 support package in 2020 to help the industry navigate through the crisis and enable the sector to emerge stronger.

Can I ask the Minister of State if the FSDF would also encourage donations or contributions from stakeholders such as financial institutions or industry professionals who have benefited from the development of the financial sector.

Sir, I want to declare my interest that I work in a financial institution which also benefited from the FSDF. Sir, with that, I support the Bill.

Mr Speaker: Ms He Ting Ru.

3.43 pm

Ms He Ting Ru (Sengkang): Mr Speaker, changes in the economies and capital markets the world over, triggered by COVID-19, have meant that stock markets, too, need to adapt to deal with disruption, and have to continually fight to stay relevant and attractive to investors. Indeed, a Business Times' article in September last year noted that in line with global trends, SGX has seen a flurry of privatisation offers in 2021. This has meant a decrease in the number of companies listed on the exchange, which is a cause for concern.

To add to the picture, some commentators have opined that there is a likelihood that money will start flowing to listings in emerging markets. They predict that emerging markets themselves may even go as far as to require domestic companies to list locally and to encourage foreign companies who are trying to raise capital within their borders to also list within that jurisdiction rather than look to capital markets in the more established markets such as New York, London, Hong Kong and even Singapore.

Yet, it has also not escaped the notice of many that there are growing concerns about whether SGX has become illiquid and uncompetitive, and that companies looking to widen their capital base would do better to look elsewhere. Indeed, of late, our homegrown success stories such as Grab and Razor have chosen to list oversees. All this has implications for SGX and the liquidity of our local capital markets as our success has historically relied on foreign entities being willing to fundraise by using our domestic market as a platform to access capital in the region.

Turning to the structure of SGX, the listed company itself, to which this Bill and its amendments relate, I note that the company's ownership structure is highly diversified, with many international shareholders from large asset managers like BlackRock and Schroders to pension funds like the Japanese government pension fund. The largest single shareholder remains SEL Holdings Pte Ltd with around 23% of shares, although I note as well that there is a restriction on the exercise of its voting rights attached to its shares.

While it is good that solid investors have indicated their willingness to invest in SGX, we must not be complacent about the competitiveness of our exchange and take this for granted. Set against this, I have a few clarifications that I wish to seek of the Minister of State.

Do the amendments allow subscription offers to be made to existing SGX shareholders? If so, where will funds come from in order for SEL to subscribe for any new SGX shares? Also, what is MAS' updated position relating to allowing shareholders to increase stakes above 5% and also if an offer is made by another stock exchange to acquire or merge with SGX?

While, historically, regulators have been somewhat cautious to allow super stock exchange mergers, as evidenced by, for example, the rejection of SGX's bid to acquire the Australian Stock Exchange over a decade ago, recent research into super stock exchanges appears to suggest that there need not be huge concerns about the exploitation of market power of these large exchanges. Admittedly, though, there may still be concerns of national interests when considering such merger and acquisition (M&A) activity relating to SGX itself.

Next, turning to the beneficiary of the SGX shares held by SEL. The beneficiary of these shares, old and new, is the Financial Sector Development Fund (FSDF). FSDF's objectives primarily relate to the promotion of Singapore as a financial centre and the development of our financial services industry. Would the Minister of State be able to give an update if there is any intention to expand the role or impact of the fund, given the potential increase in SGX shares held to its benefit?

Moving on to governance, by which I mean the governance of the board and also the dual role of MAS as both regulator and promoter.

What are the criteria applied to determining whether a director is sufficiently independent for sitting on the board of SEL? Could the Minister of State consider outlining a clear framework the various factors to be considered when appointing independent directors for SEL for the purposes of greater transparency and confidence?

As MAS has to both promote and grow the finance industry and also serve as regulator of the industry – in our case, of SGX and our capital markets – what are the processes and frameworks that are put in place to address any conflicts or perceived conflicts that may arise from this?

For example, in the UK, the Financial Conduct Authority was formed by the carving out of the former Financial Services Authority (FSA) in the wake of the Global Financial Crisis to be able to better focus as it serves its function as the regulator of the finance industry.

I would also like to seek greater clarity from the Minister of State about if and how the amendments to the Act will make it easier for the exchange to compete and stay relevant in the changing landscape, that it will not become moribund one day.

How would these ensure that our stock market and, by extension, our capital markets and finance industry remain competitive and attractive to investors who are increasingly looking for the next best thing to put their money in? What steps are our regulators and authorities taking to ensure the sustainability – and, thus, the likelihoods of many of our people employed in these industries – of our capital markets so that they remain healthy when we look to the long term? Mr Speaker, I support the Bill.

Mr Speaker: Order. I propose to take a break now. I suspend the Sitting and will take the Chair at 4.20 pm so that we have more time to do research and figure out how the reserves are being used.

Sitting accordingly suspended

at 3.50 pm until 4.20 pm.

Sitting resumed at 4.20 pm.

[Mr Speaker in the Chair]

EXCHANGES (DEMUTUALISATION AND MERGER) (AMENDMENT) Bill

Debate resumed.

Mr Speaker: Mr Saktiandi Supaat.

Mr Saktiandi Supaat (Bishan-Toa Payoh): Mr Speaker, Sir, I rise in support of the Exchanges (Demutualisation and Merger) (Amendment) Bill.

The amendments would allow SEL Holdings Pte Ltd (SEL) as the special purpose company under the EDMA to strengthen itself by allowing it to hold Singapore Exchange Ltd (SGX) shares allotted and issued in connection with the demutualisation and merger for subsequent placements.

The Original SGX shares are also held for the benefit of the Financial Sector Development Fund (FSDF), which is an important vehicle in helping to promote Singapore as a financial hub. This fund has been assisting companies to upgrade and train their staff to meet the demanding skills in the financial services sector. More than that, this fund has also been deployed over the years to carry out research and development projects relating to this sector and develop infrastructure support. Can the Minister share with the House how well-received is its various grant schemes granted under FSDF this year, especially the Cybersecurity Capability Grant (CCG)? And are there also any institutions looking into blockchain technology and carbon credit exchanges which have tapped into any of the grants? And what are the measures to ensure our grant expenditures are aligned with FSDF’s objectives?

Even during the COVID-19 pandemic, FSDF launched a $125 million support package to sustain and strengthen capabilities in the financial services sector. The support package comprised new schemes to support digitalisation in smaller financial institutions and fintech firms. It also supported existing training and talent development programmes to support financial institutions, fintech firms and individuals within the financial services sector in navigating the economic downturn. This is so that Singapore could emerge stronger as a global financial centre in Asia. With the emergence of the Omicron variant and for future crises, I suppose FSDF would stand ready to support the financial sector if the need arises? And with the dent caused by the pandemic on our economy, has the FSDF expenditure changed? How many people took up FSDF’s training support schemes – financial training schemes and IBF training schemes as well as scholarships? Have there been changes in trends since the EDMA was introduced in 1999?

Mr Speaker, it can be seen that, with this amendment, FSDF can benefit from SGX's payouts to shareholders, such as allowing SEL to participate in SGX rights issues, to receive scrip dividends in SGX's scrip dividend schemes and participate in other SGX corporate actions. And the new SGX shares are to be treated the same way as the Original SGX Shares. SEL would, with the Minister’s approval, also have the option, like any other shareholders, to receive the dividends in scrip or in cash.

That leads me to my next question. What is the worst-case scenario if this Bill goes through? In what instances will the Minister not approve the SEL request and will there be an issue of liquidity for FSDF in the worst-case scenario, preferring cash to non-cash equivalents?

My other question relates to sources of funding for FSDF. The role in which FSDF plays in terms of grants and also talent capability building, as well as the sector’s leadership talent pipeline, will be pivotal for the financial sector's growth and development. Can I ask what other sources of funds feed into FSDF, beyond the SGX cash and scrip dividends and rights issues and others? And what is the breakdown of these other sources? If the other source is from investment income from the existing assets under management, how volatile is it? Are there future plans to further diversify the sources of funding for the FSDF?

SGX – and, for that matter, most countries’ capital market exchanges – continues to be a pivotal player in Singapore’s financial sector growth and development. It is important to ensure SGX's survival and also to ensure it remains competitive. Its ability to attract listings and provide liquidity for companies will, eventually, translate, in part, into SGX's profits and eventual contributions to FSDF annually and feed into the pool of funds already accumulated in the FSDF.

SGX is and remains an important financial vehicle for companies to raise capital through listing on the exchange. In doing so, it also offers opportunities for many retail investors, especially retirees who have some knowledge of the mechanics of stock trading, to try to add value to their savings. Companies use it to raise operating capital, while the investors use it with the hope to earn regular dividends and, hopefully, a rise in investment value. Over the years, SGX has grown in stature and is recognised as one of the leading markets in Asia. It has a market capitalisation of around US$678 billion in 2021.

Certainly, for SGX, the competition is great, for it has to contend with the regional markets, especially Hong Kong, as well as markets in Europe and particularly, in the US. There are also many other spin-offs from the running of a successful stock exchange as it creates countless jobs for the many listed companies, apart from the accountants, compliance staff as well as auditors, all of whom would be involved in the regulatory reporting process.

I note that SGX shares held by SEL are non-voting to enable MAS to play a dual role as SGX's regulator and FSDF's administrator, without conflicts of interests. But can the Minister share MAS' vision of how an exchange, such as SGX, can play a pivotal role in enhancing financial sector development and financial innovations, to drive Singapore’s long-term economic growth, especially given the challenges exchanges globally are facing currently, not only from direct competition, from regional exchanges, but also from technological disruption and various other ways of capital raising externally. After all, it eventually feeds as part of a stable source of fund into FSDF. Mr Speaker, Sir, on that note, I support the Bill.

Mr Speaker: Ms Foo Mee Har.

4.27 pm

Ms Foo Mee Har (West Coast): Mr Speaker, I would like to express my support for the Exchanges (Demutualisation and Merger) Amendment Bill, henceforth, referred to as EDMA. This Bill is a timely response to the recent announcement by Singapore Exchange Ltd (SGX) to offer a scrip dividend scheme (SDS) to shareholders.

The current EDMA does not allow SEL, a special purpose company, to hold SGX shares for the benefit of Financial Sector Development Fund (FSDF), to elect to receive new SGX shares. This move to amend the EDMA will provide SEL with the flexibility to participate in SGX's corporate actions in a cost-effective manner and accord it the means to exercise rights similar to other shareholders of SGX. This legislative move is crucial to ensure that the core principles of EDMA and SEL are maintained, whilst allowing SEL, SGX's strategic investor, to support the exchange in strengthening its working capital position, with the option to retain cash with SDS.

It is in this spirit that I would like to seek the Minister of State's response on three areas of inquiry which, I believe, will better clarify the Bill’s impact.

Firstly, I would like to ask if SEL's option to elect for SGX scrip has any impact on the available cash flow for existing and future FSDF initiatives. Since its inception, FSDF allows MAS to support financial sector transformation and has provided strategic funding to support the development of Singapore as a global financial hub. It is critical that FSDF’s wide-ranging development initiatives, from skills upgrading, R&D to infrastructure development, must not be constrained in any way.

For instance, FSDF launched a $125 million support package in April 2020 to augment the growth of Singapore’s fintech sectors and accelerate digitalisation. In the same year, FSDF also enhanced the Financial Sector Technology and Innovation Scheme to boost our talent pipelines for Singaporeans into fintech.

Sir, I would like to add my interest as a professional working in the financial sector and benefiting from FSDF.

The point is FSDF’s income obtained from SGX shares came up to about $78 million in FY2020. On the other hand, it is worth noting that the expenditure for FSDF has increased to $247 million in the same financial year. I applaud the meritorious development projects that FSDF has been supporting over the years and urge MAS to continue investing strongly in the development of the Singapore financial sector.

However, given that we are not quite yet out of the woods as far as the pandemic is concerned, I would like to ask the Minister about the impact to SGX's cash dividend funding for FSDF initiatives with SDS. Apart from SGX dividends, what other sources of income does FSDF receive? How dependent is FSDF on SGX dividends, in order to maintain its portfolio of projects, both in the medium and long term?

My second inquiry focuses on the Bill's impact on SEL's influence on SGX. With the SDS, dominant shareholders, such as SEL, are in a position to potentially increase their stake over time should they elect to receive SGX shares whilst other investors may choose otherwise.

It is worth noting that for MAS to play a dual role as SGX's regulator and FSDF's administrator without conflict of interest, safeguards were in place at the time of EDMA's introduction. For example, SGX shares held by SEL are non-voting.

Despite such safeguards, the action of a dominant shareholder with non-voting interest can still indirectly influence shares performance by virtue of options in its dividend policy.

Efficient corporate governance can be achieved with the use of non-voting shares, provided that robust governance delineating voting and non-voting shares is in place to motivate actors to align with intended goals.

As at present, SGX shares held by SEL are still ambiguously classed despite the non-voting clause. For instance, these shares are still classed as ordinary shares that possess the possibility to be used for controlling interest purposes when sold to other investors upon approval by the Minister-in-charge. I would like to ask whether the introduction of a dual-class share option has been considered to provide greater clarity.

The introduction of scrip dividend further increases SEL's ability to amass a higher proportion of these ambiguously classed SGX shares. SEL's current stake in SGX is about 23%. What are the considerations to vary or maintain the shareholding of SGX shares under SEL with SDS? Furthermore, SEL's decision to elect scrip or cash dividend may invite unnecessary speculation, due to the perceived information asymmetry between dominant and minority shareholders. How will this issue be managed going forward?

Speaker, Sir, it is also rather counter-intuitive for a significant and strategic investor, such as SEL, to hold non-voting shares. How will the future of SGX be safeguarded if voting rights to direct the company do not rest with the largest and strategic investor? How will we safeguard the situation to prevent a group of SGX shareholders from forming a large enough segment of voting power and choose to exercise it in situations where they will move SGX in the wrong direction.

More broadly, this Bill also comes at a time when SGX has recently announced the introduction of Special Purpose Acquisition Companies (SPACs) into the bourse. Market watchers expect SPACs to boost SGX’s position as a key financial hub in Asia, with SGX gaining from an overall higher valuation with the listing of tech-related and new economy companies. However, SPACs have also received mixed market reactions from institutional and retail investors alike, including the potential downsides and risks of SPACs to retail investors. What is the impact to SGX from an overall valuation of the Singapore market with the entry of SPACs? More specifically, would this have any bearings on SEL’s stake in SGX in the future? Notwithstanding the points above, I support the Bill.

Mr Speaker: Minister of State Alvin Tan.

4.35 pm

Mr Alvin Tan: Mr Speaker, Sir, I thank Members who have spoken on the Bill and for their support of its introduction. Let me first deal with the questions on safeguards and governance over FSDF before addressing the impact of electing to receive scrip dividends on FSDF’s ability to carry out its function.

Ms He Ting Ru and Ms Foo Mee Har had asked about safeguards over potential conflicts of interests when MAS both regulates SGX and also administers the FSDF. Ms Foo Mee Har had also asked whether more could be done to clarify the nature of SEL's holdings and if SEL could, inadvertently, influence the outcome of a scrip dividend exercise by signalling its intent.

First, on potential conflict of interest, MAS' independence as a regulator should not be affected. MAS does not derive any income or loss from SGX shares. Dividends from SGX shares are channelled to FSDF for the benefit of the financial sector as a whole. Further, even as SEL derives income from holding of SGX shares and this benefits the FSDF, SEL is not accorded voting rights for its SGX shares. The Bill has provided that this same safeguard on non-voting rights will also apply to new shares received. The non-voting nature of SEL’s shareholdings is disclosed in SGX’s financial statements. In addition, SEL has independent directors who owe a fiduciary duty to SEL. The directors are nominated by MOM, MTI and both public agencies have economic and manpower development mandates that are similar to the objectives of FSDF.

Next, regarding any SGX scrip dividend scheme, all shareholders would make their own assessments, taking into account their individual circumstances in deciding whether to elect for new shares in a scrip dividend scheme or not. Shareholders' decisions are, typically, not announced while the election period is ongoing.

Mr Saktiandi Supaat and Mr Liang Eng Hwa asked about the governance structure of FSDF and how MAS ensures that FSDF’s expenditures are aligned with FSDF's objectives.

MAS takes a rolling five-year view for planning of FSDF's grant expenditure. This is in view of the relatively long gestation period of most development initiatives, such as developing industry-wide infrastructure, developing local talent in emerging finance areas and promoting financial innovation and technologies. The Minister-in-charge of MAS approves the strategic allocation of FSDF's monies on a rolling five-year basis and based on that approved allocation, the Managing Director of MAS approves FSDF's annual budgets and MAS publishes FSDF's financial statements annually.

Grant schemes are developed and, periodically, also reviewed to ensure that the funding provided does, indeed, meet industry’s needs. In recent years, there has been an increase in FSDF's funding to support skills upgrading and reskilling initiatives and financial institutions' push to adopt financial technology and innovation.

Individual projects seeking FSDF's funding are also subject to robust governance and controls. To ensure the prudent usage of FSDF's funds, the fund is administered in compliance with MOF's guidance on grants governance, notwithstanding that FSDF is not funded by taxpayers' monies, given that it was set up using the proceeds from the demutualisation of privately-owned exchanges, which I described earlier.

Taken together, these measures help to ensure that FSDF's expenditure is aligned with FSDF's objectives and that the funds are used prudently.

Mr Saktiandi Supaat also asked about recent trends of FSDF's expenditure, how the pandemic has affected FSDF's expenditure and the take-up of specific FSDF-funded schemes, while Ms He Ting Ru also sought an update on the role of FSDF. FSDF currently supports a wide range of initiatives across talent development, technology and innovation. It also supports other initiatives on financial sector activities and consumer education.

Pre-COVID-19, FSDF's annual expenditures were within $90 million. In FY2020/2021, FSDF's annual expenditure increased to $247 million as new support schemes were launched to sustain and strengthen capabilities in our financial services and fintech sectors, amidst all of the COVID-19 disruptions. This includes the $125 million package that was launched in April 2020 alluded to by Mr Saktiandi Supaat.

As part of the support package, MAS increased course fee subsidies for relevant IBF courses and extended the subsidies to include local employees of fintech firms. As a result, we have seen a very strong response from financial institutions in tapping on the funding available to upskill and reskill their financial professionals. Training participation has increased significantly since the launch of enhanced support in April 2020. In fact, the level of training participation in the first 10 months of 2021 was already triple that, compared to the whole of 2019.

The FSDF also supports efforts in developing multiple pathways to build our pipeline of local financial sector talent. This has resulted in financial institutions committing in 2020 and 2021 to hire and to train close to 1,100 Singaporeans as part of their structured management associate programmes. In addition, the FSDF has also supported over 280 outstanding Singaporeans to acquire specialist skills through postgraduate studies in areas, such as data science, financial engineering and risk management.

As for the Cybersecurity Capability Grant (CCG) scheme, it aims to develop local cybersecurity talent in our financial services sector. How? By supporting financial institutions to set up or expand regional and specialised cybersecurity teams in Singapore. Since 2019, five financial institutions have tapped on this CCG to anchor their regional cybersecurity capabilities here in Singapore, generating 60 new cybersecurity positions here.

To Mr Saktiandi Supaat’s question on FSDF's support for nascent areas, such as blockchain technology and carbon credits, FSDF has, indeed, supported such projects where they have the potential to strengthen our competitive advantage as a financial centre.

Given that FSDF provides funding for a wide range of initiatives that support the development of Singapore as a global financial hub, Mr Saktiandi Supaat and Ms Foo Mee Har have asked whether giving SEL the option to elect for scrip dividends, in lieu of cash, could constrain FSDF’s ability in supporting the financial sector going forward. Ms He Ting Ru has also asked how SEL would fund its participation in SGX subscription offers.

First, the decision for SEL to participate in SGX's scrip dividend scheme and the proportion of scrip dividend that SEL will elect for, as I mentioned earlier, will have to be approved by the Minister-in-charge of MAS, based on FSDF's expected financial needs over the medium term. Similarly, the decision for SEL to participate in subscription offers and how SEL funds its participation in any subscription offers, will also have to be approved by the Minister-in-charge of MAS.

Second, FSDF's current financial position is in fact strong. FSDF has tripled in size since its inception in 1999. This is so because MAS has been prudent in managing FSDF's total grant expenditure and especially because of the compounding effect of the returns on its investment of FSDF funds over the years. This has enabled FSDF to provide significant support to the financial sector, especially during the recent COVID-19 crisis period and FSDF is also geared up to meet potential future demands as the industry responds to new trends in digitalisation and sustainability. But should SEL choose to elect for scrip dividends, this should not adversely affect FSDF's ability to support the financial sector.

Next, Members were interested to understand how, in the absence of voting rights, FSDF is kept assured that the value of its holdings in SGX is upheld. In a related vein, Ms He and Mr Saktiandi had also asked about how SGX plans to keep up with competition and technological disruptions, given that the FSDF is partly funded by SGX's dividends and shares.

As I just mentioned, FSDF's fund size has tripled since its inception in 1999. MAS will continue to be disciplined in managing FSDF's grants and investing the surpluses in a diversified investment portfolio, so as to sustain FSDF's ability to support financial sector development initiatives over the long term.

On SGX's efforts to build and retain competitiveness, an area of interest by all of Members who have spoken on this Bill, please allow me to reply briefly at this point. SGX has made progress in its strategy to build a multi-asset exchange. In addition to the equities market that Mr Saktiandi had mentioned, SGX is a key bond listing venue in Asia and offers a strong suite of derivatives for risk hedging across a wide range of asset classes. So, you have equities, you have bonds, you have derivatives. In recent years, SGX has been building up its bond trading and FX capabilities and pursued initiatives to enhance connectivity, including the latest collaboration on an ETF Product Link with Shenzhen Stock Exchange.

But as Ms He and other Members mentioned earlier, SGX faces keen competition, not just regionally but also internationally from many different exchanges across the world. So, it will have to continually evolve its strategies, evolve all its offerings in response to the emerging competition, so that it is not standing still. They could include innovation, digitalisation efforts to streamline their processes and enhance efficiencies for the industry, harnessing new trends such as the growth in sustainable investing and building synergistic links with other exchanges.

Ms He also asked for MAS' position on allowing SGX shareholders to increase their stakes to be above 5%. MAS' position remains the same. MAS will allow suitable, strategic investors who can promote SGX's growth and development to acquire substantial stakes of 5% or more in SGX and such strategic investors must first seek MAS' approval.

Mr Speaker, Sir, to summarise once more, MAS seeks with this Bill to provide SEL the flexibility to receive new SGX shares, just as any other SGX shareholder can. This will also provide FSDF with an additional option to generate income for the fund. And this is important because the fund, FSDF, as I have mentioned, is to drive growth and create good jobs for Singaporeans in a very dynamic and fast-evolving financial sector in the coming years. With that, Mr Speaker, I beg to move.

Mr Speaker: Any clarifications?

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. – [Mr Alvin Tan].

Bill considered in Committee.

[Mr Speaker in the Chair]

The Chairman: The citation year "2021" will be changed to "2022", as indicated in the Order Paper Supplement.

Clauses 1 to 5 inclusive ordered to stand part of the Bill.

Amendment agreed to.

Bill reported without amendment; read a Third time and passed.