CHAIRMAN OF SINGAPORE INTERNATIONALMONETARY EXCHANGE CALLS FOR GREATER CROSS-BORDER COORDINATION.

BOCA RATON, Fla.--(BUSINESS WIRE)--March 16, 1995--Elizabeth Sam, chairman of the Singapore International Monetary Exchange (SIMEX), said here today that the Barings Group failure that resulted from its overextended futures trading has pointed up the "need for more cooperation and information-sharing within the industry across national borders."

"At a time when there is so much talk of globalization, no industry is more global than ours," she told a panel at the Futures Industry Association's International Futures Industry Conference at the Boca Raton Resort and Beach Club.

Mrs. Sam said that SIMEX is in the process of appointing an advisory panel of prominent international experts "to advise on the best practices in the industry worldwide that can be adopted to improve our operations and minimize the chances of recurrence of such an incident."

She announced that the panel will include: Wendy Gramm, former Chairman of the Commodity Futures Trading Commission (CFTC); Jack Sandner, Chairman of the Chicago Mercantile Exchange (Bill Brodsky, President of the CME, will be his alternate on the panel); John Gilmore, former Chairman of the Chicago Board of Trade; Leo Melamed, Chairman Emeritus of the Chicago Mercantile Exchange; and Michael Jenkins, Chairman of the London Commodity Exchange.

Mrs. Sam acknowledged that a question which has been raised was the size of the Barings' position which was allowed to be placed on SIMEX. She noted that Barings officials over a period of months had assured the exchange, in response to its inquiries, that the firm was "fully committed to meet any financial obligations that its Singapore futures operation might incur." One Barings official, it was noted, visited Singapore and personally delivered the firm's assurances. Mrs. Sam stated, in addition, that "throughout the period just before the collapse, Barings continued to make its very sizable margin payments to SIMEX on time."

Swift Action By SIMEX

"To be sure, some tough lessons have been learned over the past several weeks," she commented, "but I also think it is fair to say that SIMEX has dealt swiftly and effectively with problems created by Barings' high-risk trading activity."

Mrs. Sam said that "the positions in the books of Baring Futures Singapore (BFS) were fully disposed of and transferred within a week" with "minimum disruption of the market."

"After the transfer of disposal of all BFS' positions, a net balance of some US$86 million remains which has been turned over to the BFS judicial manager for distribution to the customers of BFS." she said, adding that the direct customer of BFS "has received in full all balances maintained" with the firm. A judicial manager is a position somewhat similar to that of a bankruptcy trustee in the United States.

"What the Barings incident has highlighted is that we need to be more vigilant in our surveillance of our market firms. We will need to be more critical of easy answers provided to our supervising questions. And this vigilance will need to be applied across the board even to `blue chip' firms," said the SIMEX Chairman.

Balancing Regulation and Market Dynamism

Noting that "no regulatory system can ever totally eliminate the possibility of fraud or mismanagement," Mrs. Sam said that "SIMEX is keenly aware of the need to achieve an appropriate balance between regulation and the dynamism of the marketplace. After all," she commented, "Singapore was established as a free port in 1819 by Sir Stamford Raffles and we have benefitted ever since."

"SIMEX and the Monetary Authority of Singapore," she continued, "are jointly reviewing the rules of business conduct to enhance the monitoring of exposure risk. We shall require head offices of member firms to strengthen internal controls over their Singapore operations."

SIMEX Post-Barings Volume Rises

As a measure of confidence in the future, Mrs. Sam cited an increasing volume of business at SIMEX in the wake of the Barings collapse. She noted that during the two weeks immediately after that event, "average daily volume in our Nikkei-225 futures contract was up by 20 percent over the previous two weeks, while the volume in Nikkei option contracts has remained steady. Over the same period, total average daily volume in all our contracts is up, by 10 percent." Before Barings' collapse, Baring Futures Singapore had been one of the exchange's largest traders in Nikkei-225 futures.

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