That was the story of the Flash Crash, with order imbalances propagated through the futures market due to pass-the-parcel dynamics before ricocheting back to affect prices in the cash market. 26 A second channel of contagion is between different exchanges and trading platforms. Here, too, HFT has changed the landscape. Because HFT strategies have emerged to arbitrage differences, price transmission across exchanges and platforms is near-instantaneous. It also has the potential to be more disruptive. Liquidity on these exchanges is no longer  25  Hardin (1968). 26  CFTC-SEC (2010). 10  BIS central bankers’ speeches  pooled and centralised. Instead it is distributed and localised, increasing the potential for illiquidity premia to emerge in periods of stress. A third potential contagion channel is across stocks. HFT algorithms tend to amplify crossstock correlation in the face of a rise in volatility due to their greater use of algorithmic trendfollowing and arbitrage strategies. That is consistent with the evidence in Chart 9, with heightened correlation per unit of volatility relative to the past. Taken together, these contagion channels suggest that fat-tailed persistence in individual stocks could quickly be magnified to wider classes of asset, exchange and market. The micro would transmute to the macro. This is very much in the spirit of Mandelbrot’s fractal story. Structures exhibiting self-similarity magnify micro behaviour to the macro level. Micro-level abnormalities manifest as system-wide instabilities. In many respects, this is an unsurprising conclusion.
Singapore has political and economic stability, well-regulated financial markets, excellent transport and digital connectivity, a skilled talent pool, and extensive trade linkages with ASEAN. Singapore has one of the most vibrant PE/VC ecosystems in Asia. PE/VC assets under management increased by 42% year-on-year to $ billion in 2021. Over the last five years, growth in PE/VC investments has averaged nearly 30% per annum. As of June this year, there were a total of 428 PE/VC managers in Singapore, up from 336 at the start of 2021. Many existing players have expanded their capabilities and investment teams. The Asia Pacific region remains the top investment region for this group of managers, with 55% of assets invested within the Asia Pacific. Singapore accounted for 46% of the record-high $ billion in VC deal value in ASEAN last year [5] . To make PE/VC investment opportunities more accessible, we now have private market platforms in Singapore – such as ADDX and CapBridge. MAS is working to anchor more such platforms here. Investing to deliver sustained long-term returns in an increasingly uncertain world is no easy task. I hope today’s conference will give you ideas for growth and opportunities to connect with valuable partners. Thank you and best of luck. [1] Boissay, F, De Fiore, F, and E Kharroubi, “Hard or Soft Landing?”, BIS Bulletin No.59, July 2022 [2] BIS Annual Economic Report 2022 [3] Bain & Company Asia-Pacific Private Equity Report 2022 [4] Preqin Territory Guide ASEAN 2022 [5] Preqin Territory Guide ASEAN 2022