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Singapore’s Secret Sauce Revealed

Episode 109

Singapore’s Secret Sauce Revealed

Posted October 13, 2023 at 11:30 am
Yujun Lin
Interactive Brokers

Yujun Lin, CEO of Interactive Brokers Singapore reflects on a lifetime in the markets and explains why Singaporeans have consistently and successfully punched above their weight within the Asian investing community.

Related Links:

Home page: https://www.interactivebrokers.com.sg/en/home.php

Commissions page: https://www.interactivebrokers.com.sg/en/index.php?f=1590

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See: our hotline in Singapore from 8:00 AM to 5:00 PM you can call our general or hotline, which is the 65-6923-5600.

Summary – IBKR Podcasts Ep. 109

The following is a summary of a live audio recording and may contain errors in spelling or grammar. Although IBKR has edited for clarity no material changes have been made.

Andrew Wilkinson

Welcome to this week’s IBKR podcast from me, your host Andrew Wilkinson. In this episode, I’m joined by my colleague Guillaume Roux Chabert over in Interactive Brokers’ Singapore office, a huge welcome Guillaume. How are?

Guillaume Roux Chabert

You. Yeah. Very good, Andrew. Thank you very much.

Andrew Wilkinson

And I’m also joined by Yujun Lin, who is the CEO of Interactive Brokers Singapore. Welcome, Yujun, how are you?

Yujun Lin

Thank you very much. I’m very good.

Andrew Wilkinson

We’re going to start with you, and this is your first time as an Interactive Brokers’ Podcast guest Yujun. Tell us a little bit about what’s going on in Singapore and the investing landscape there, because the reason we’re having this podcast is because there’s been a big shake up in the investment landscape there, courtesy of one of Interactive Brokers’ big competitors there. Tell us a little bit about what’s going on.

Yujun Lin

At Interactive Brokers we like to get straight to the point and the point here is that about a week, more than a week ago, TD Ameritrade announced that they were getting out of the retail business in Singapore. So, I think this announcement caught everybody by surprise, including ourselves. So, we don’t really want to speculate as to why they did it, but I think the top most question in most peoples’ minds will be that, all these brokers, especially the ones with a foreign brand or international brand, are they really here to stay? Would they have to go through multiple changes of this scenario where they have to keep changing brokers? And I think what we want to say tonight is really, that absolutely Interactive Brokers is here to stay, and I think throughout the course of this podcast, we will be peeling back the onion on the reasons why.

Andrew Wilkinson

OK. And Yujun, you’re a native of Singapore, of the island. How long has Interactive Brokers been present in Singapore?

Yujun Lin

OK, so I think we’ve been in Asia for many, many years, decades, almost as long as the company has been here and for the longest time. So, not many people know this, right? For the longest time, Singaporeans could actually go to Hong Kong and open an Interactive Brokers account offshore. And the interesting thing I found out when I joined is that, at some point, this completely unsolicited business grew to a critical mass in which we started thinking that we should do the right thing, come to Singapore, get a license so that investors feel like they’re protected. So, they were always protected, right? Don’t get me wrong. It’s just that people always trust a a local company, a company for local residents more, and we said in 2019, we’re going to come here. We’re going to set up. We’re going to do this properly and we did, right. Another interesting tidbit that came out is that shortly after we got our license here in 2019, another quite large American broker pulled out. So, I won’t mention the name here, but you know people who know who it was. And that worried us because we were like, “Okay, what is it that you know that that that we don’t?” So, what followed was actually very interesting. It was a little bit of right place, right time as you know, COVID hit the world shortly after everybody went online and our business essentially just exploded. We went from a two-man office, Guillaume was employee number two, to now I think we’ve we are closing in on 50 people here. And I don’t see that growth slowing anytime both in terms of business and number of headcount that we’re investing in Singapore.

Andrew Wilkinson

Very good. So, I’m going to turn to Guillaume now and Guillaume, maybe for people like myself who have never been to the region, my understanding is that Singapore is a big deal. Tell us about its significance from an investing perspective, please.

Guillaume Roux Chabert

Absolutely. I mean, Singapore is really a critical hub for Asia in general. It’s a wealth management center for most of the region. So, it acts a bit like Switzerland in Europe for instance. So, what we see indeed, is among the the diversity of the population in Singapore, a very stable environment that manages to attract a lot of wealth from the region. And so, we see, as Yujun mentioned, a tremendous potential and it’s been confirmed by the numbers. Actually, when we see the number of family offices relocating to Singapore, we see the number of millionaires or so in Singapore with regards to the percentage of the population. It’s a quite impressive nation and has full respect in the region when it comes to financial strength throughout the ecosystem, be it on the banking side, be it on the prime brokerage side or any other service provider in the region.

Andrew Wilkinson

Yujun, can you perhaps define the type of investor that is there, is it retail, institutional or asset manager or a mix of all of that?

Yujun Lin

So, as I was saying, it’s a pretty good mix. I don’t think there are final numbers on all these things, but it’s basically estimates, but you will find that the ecosystem here is rich and very balanced. And the reason why I know this is because, so you know again, you said I’m a local boy, I am born and bred in Singapore, studied here, been here essentially all my life except for some work stints overseas. For the first 15 years of my career, I was with the Singapore Exchange and the exchange you really see the entire cross section of investors in your capital markets and we’ve always found that consistently over the years is a very good plan of retail institutions and all of the, I would say, service providers that serve this segment, all the financial firms, the banks, the brokers and now increasingly the family offices. So, if I could take a step back, and since you know to address this what you said about Singapore, you know being widely known as a very important financial hub. I think when we look at the geographical position of Singapore, this is a common story where we say this all the time, you know it was started as a trade hub, lots of goods flowing in and out. Then it became an FX hub, then it became an overall banking and finance hub for Asia. I think all this kind of leads me to my point, which is you know the Chinese, since you know the Asians, seem to be the the flavor of the month in Hollywood right now, right, Chinese and Kung Fu. So, the Chinese have a philosophical belief that flowing water is life, right? Standing water is bad. Flowing water is really important. So, you see this in Fung Shui, the people putting fountains at the doors, your smaller fountains, big fountains wherever the water must be moving. And I think Singapore definitely embodies that, because we see an upsized amount of flows for the size of a country and the size of our population. And that is how we punch above our weight. Right, that’s first point. The second point about how you know, the way I see Singapore in this region, is really because we have a secret sauce. And our secret sauce is that we are really small geographically and population wise. So, we need to constantly strive for relevance. The moment we stop trying, we will be overrun by everybody else. But we will be forgotten in history. And so, this drives us actually to grow, but very sustainably, because you cannot, I guess, we don’t want any reputational damage. We get it right most of the time. And so, in this constant striving for growth and also safety and relevance and I think that’s what allowed us to kind of stay ahead all this time even as the rest of Asia continues.

Andrew Wilkinson

So, let me turn to Guillaume again. You see what customers/clients are doing all the time. For the traditional retail investor over in Singapore, is there a specific target market location that they are investing i?

Guillaume Roux Chabert

From what I see with clients here, and again there is a high diversity of customers in Singapore as Yujun mentioned, I mean it’s a 5.5 million inhabitant nation: 3.5 [million] are Singaporean 1.5 [million] are qualified as non-resident and half a million are permanent resident, like I am, so the requirements and the need can be a little bit different probably like for Singaporean, a little bit more exposure to the local market, whereas for the permanent resident and the expat, maybe a stronger exposure to their original market/ original countries. So, what I see in terms of flow is of course U.S. stock equities has a strong interest within the Singaporean and the good thing is that we are extremely competitive on these markets and our technology is well designed indeed for the US, the European markets. But also, I see a strong interest in products such as US corporate bonds, futures and options. Maybe we can also talk a little bit more about derivative later. But so, the thing also is that within this population here, 29% of population are categorized as non-resident; that’s one-third of the population. And all old people there is a strong implication with the financial industry or in high tech companies, right. So, it’s interesting to note that Interactive Brokers Singapore consider all tax residents in Singapore and for instance, US passport holders can open accounts and if they are tax residents in Singapore with Interactive Brokers Singapore. This is quite unique and very, very little financial institutions can offer that type of service, right. So, this includes also all the tax forms related matters and market access to global exchanges on the platform.

Andrew Wilkinson

Back in the 90s, I was trading interest rate contracts through the London International Financial Futures Exchange, LIFFE, and I remember the Singapore Exchange was extremely important and there was an explosion of growth in the derivatives market. Yujun, you worked for the Singapore Exchange. How important is derivatives to Singapore these days?

Yujun Lin

You look at the revenue contributions in operations, I was there for this, you will see that the mix of revenue has shifted over the years. So, it started because basically the stock market is generally very profitable because you are the incumbent. You bear the Singapore name. And nobody has really challenged that status, right? So, stock market made a lot of money for the Singapore Exchange back in the year 2000 when it first merged with the derivative section. But over time the derivatives business grew more and more. And I think today if you look at it, I haven’t seen the latest annual report, but you know it was getting there anyway, more than half of the business on Singapore Exchange comes from derivatives now. I think this is very much reflective of the Singapore story which I mentioned earlier, which is, we’re always a hub, if not an international hub for flights like you know, because we have SIA and a really awesome airport, we might be a regional hub for staff, goods coming through China, going to India and I think the Singapore Exchange and the Singapore government, to be very frank, hit upon that sweet spot of creating regional and international products and have them trade locally. Many people don’t know this, but actually Singapore Exchange, the derivatives portion at least, was started in collaboration with the CME. In the US right back then, when people were still trading face to face on the trading floor, you can’t really stay away for 12 hours without falling over. There was this thing called Mutual Offset System, so you could trade the Nikkei futures for example on the CME and have that move to Singapore in the morning and and have that offset position here. But you can do the the same the other way, right? So, that was the first 24-hour futures trading market, and it was created by the CME. You know, a lot of credit goes to them, and you know, it just happened to be this small little, dinky exchange in southeast Asia, called the Singapore Exchange, or SIMEX at the time. So, it’s been a rich part of our history and and it really fits the Singapore story well.

Guillaume Roux Chabert

And if I may add, actually to that, my love story with Singapore goes back to 2003, when I participate to the regulation in electronic trading, whether, for instance the migration from the pit area to a fully electronic direct market access that was the close of the MSCI Taiwan pit. I will always remember that part of my life, of course, in Singapore, and I think it resonates today with the strong mega trend of digitalization of the intermediation for retail customers, but also for institutional customers.

Andrew Wilkinson

Now Guillaume shoulder to the wheel here. You’ve been inundated with inquiries about Interactive Brokers’ services. What are you telling people about opening or transferring accounts? How do you respond to that? How do people bring in positions from other brokers to Interactive Brokers?

Guillaume Roux Chabert

Yes, absolutely. So, indeed we have been asked by literally thousands of retail clients how to open an account with Interactive Brokers Singapore. Nothing more simple. We have made it very smooth and very seamless for Singaporeans to open an account. So, we have interfaced with Sinpass, which is our local identifier with the government database. So, any person in Singapore who has a Sinpass can just log in to our website ibkr.com create an account, set up a user and the password, remember the username and the password of course, and then select Singapore and then after you have the choice to select Sinpass and then the system will automatically, pull out all the relevant information for us to open the account and what we notice is the account are open within 24 hours. Once the account is open what happens is, the second step is to arrange the transfer. Again, we have made it very simple, so inside the Client Portal the clients just need to go to the Pay and Transfer menu and select ACATS, which is one of the, what we call, automated customer account transfer service and this process allows for the electronic transfer of securities and cash. So, both through the depository with completion of the process taking something like 3-4 business days. So, those are the two steps that are important. First, to create the account, and once the account is created to arrange the transfer with this ACATS, and to select US as a region.

Andrew Wilkinson

And this is a loaded question, since I’m in charge of education here, what do you when somebody joins Interactive Brokers but they’re not familiar with the platform?

Guillaume Roux Chabert

We do have a lot of educators that are currently helping to set up some sessions, make sure that people get familiar. So, what we recommend, of course, is to go to our excellent IBKRcampus.com where you have tutorials about our Client Portal, about our mobile application, and about our latest applications such as GlobalTrader and HandyTrader. Those are well-informed online and so those tutorials are really highly recommended. Another tip that I give is actually there is also possibility to have a paper account once you create your account. So, there is no rush. You can always select instead of the live account to select the paper account. And the beauty of this paper account is that it reflects exactly what the configuration are on your production account and we give you $1 million paper money to play around and to get familiar with all the functionalities. I’d like to mention also, there are a lot of users that have created happy communities about the Singapore applications with Interactive Brokers and I invite our audience to check on the telegram groups. There is one official, nonaffiliated but its named Interactive Brokers Singapore that has about 2000 members and that can give a good, unbiased, and unaffiliated point of view from a user point of view.

Andrew Wilkinson

So, Yujun, let me ask you if I’m a US passport holder or an expat in general, but I’m a tax resident in Singapore, what should the approach be for moving over to Interactive Brokers Singapore?

Yujun Lin

For some of the technical stuff, I’ll let Guillaume answer. I would say that overall, the good thing about Interactive Brokers of Singapore is that we are a full-featured instance of the global platform. And, we accept essentially all nationalities, subject to sanctions of course, just to be realistic. So, expats are welcome, and locals are more than welcome. There’s a reason why we’re in Singapore. The bulk of our customer base is Singaporean. We don’t just serve the expat community and we like to think that we are democratizing finance a little bit, right? We make it really cheap, really accessible, really easy to use. You can find all the information online. There are basically zero barriers to entry to setting up an account and then getting started investing in the world. One thing I will add also as a local boy is that in the past four years of my life, so I’m basically as old as Interactive Brokers, right? So, feeling by nature, I’ve noticed that Singaporeans are very pragmatic people. And the trading interests of Singaporeans, and actually everybody who comes here, is in a way slightly infected by that pragmatism, that energy, which is to say that, we know we are small, we need to address the world. So, we are very worldly. We trade all the overseas markets, wherever there is liquidity and exciting and high quality. Singaporeans are very fast to take advantage of new investment trends. For example, new exciting companies coming up. And I think the entire trading community here has that spirit, which is, what is the best thing that I can invest in that’s good for my portfolio, right? So, happily, Interactive Brokers covers 150 markets across 33 countries and I think 27 different currencies that we accept. So, we bring the world to Singapore just like Singapore has brought Asia to the world.

Andrew Wilkinson

Do you have walk in services? How do you deal with that audience?

Guillaume Roux Chabert

Thanks for asking this question. Indeed, we don’t have any walk-in service, so there’s no need for you to come to the office. So, we put everything conveniently online where you can have information with the chat or with our hotline in Singapore from 8:00 AM to 5:00 PM you can call our general or hotline, which is the 65-6923-5600. Of course, we’ll put that in the text of the podcast for further information.

Andrew Wilkinson

Guillaume Roux Chabert, head of institutional services over in Singapore, thank you very much indeed for joining me today. And Yujun Lin, CEO at Interactive Brokers Singapore, thank you for joining me today. You can listen to more episodes at ibkrpodcast.com. And don’t forget, please leave us a review wherever you download your podcasts from.

Yujun Lin

Thank you, Andrew.

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