Teyu Che Chern, CEO of the rebranded Phillip Nova, discusses the driving force behind the firm’s four-decade journey
With the pandemic but a recent memory, Teyu Che Chern of Phillip Nova is back on the road in earnest. He has maintained contact as CEO of a regional homegrown brokerage with a network of partners and clients. He has “done a bit of travelling” in recent months — covering Vietnam, Malaysia, Dubai, Hong Kong, Shanghai, Thailand and most recently, Jakarta — as he “swings back into action”.
Equally important, Teyu relishes the chance to catch up with his counterparts at other brokerages and exchanges — picking up from where they had left off before the pandemic — as they all swap ideas or showcase their latest product offerings so that the entire trading ecosystem can better serve the various types of customers, and that the market as a whole, can further grow.
Phillip Nova, a part of the Singapore-based PhillipCapital group, has identified four key customer types. First, financial institutions and next, physical commodities traders who need to hedge their bets with futures. Third are professional traders, and finally, individual retail clients. “We continue to be very active in all these four segments,” says Teyu in an interview with The Edge Singapore.
Even as Teyu maintains his ties with the existing ecosystem, the firm he leads is actively building new ones. This is especially so with a recent rebranding. For four decades, Phillip Futures was the name to mark its focus on offering brokering services for futures. This contrasts the securities-focused Phillip Securities, the other key unit of Phillip Capital, headed by executive chairman Lim Hua Min since it was founded in 1975.
Last year, after securing its own securities brokerage license, Phillip Futures was rebranded as Phillip Nova. “So I will say, let’s continue with the maturity and stability of about 40 years old while retaining the curiosity and innovativeness of a one-year-old,” says Teyu. “We need to keep our minds open, to keep learning, to keep growing.”
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According to Teyu, the key difference with the rebranding is that Phillip Nova has added new products like CFDs, stocks, and ETFs. “If you use the name Phillip Futures but offer equities and ETFs, it sounds weird.”
Along with the name change and additional new products offered, there are some changes to the firm’s client base. “The client base, certainly the retail client base, has grown because of equities, ETFs and CFDs. And in terms of numbers, generally, the number of clients trading equities is much more than the traditional asset class like forex and futures,” says Teyu.
The move to win the stocks trading license was a key to Phillip Nova’s next growth stage. Traditionally, the firm already served relatively sophisticated clients trading forex and futures. At the same time, they are likely already trading equities but with other brokers. Teyu believes there is a flow in the opposite direction.
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New clients of Phillip Nova presumably start with trading stocks and ETFs, and when they pick up more experience and get savvier, they might soon be ready to move into other products. “The wall between the different products has also been broken down, and customers as customers become more sophisticated,” says Teyu.
Furthermore, Phillip Nova clients need not maintain separate accounts and funds as they trade more products. “They are using one account, one ledger, for multi-asset class trading, a one-stop shop,” says Teyu.
Phillip Nova, meanwhile, can achieve better economies of scale. Teyu, while offering more clients more trading options, is doing so with the same dealing, settlement and risk management teams. “We’ve made sure our whole setup is geared towards catering to all the different financial products.”
He is also quick to point out that rather than cannibalise market share from other existing players, Phillip Nova aims to grow the overall pie, especially one that goes beyond Singapore and into other regional markets. “Offering stock trading is not to eat into someone’s share, but to bring more products and be more competitive.”
Phillip Nova has built up a loyal group of customers over the years with regular outreach programmes such as a recent gathering on a boat (Photo courtesy of Phillip Nova)
Education and products
A key ingredient to growing a bigger pie is attracting more investors and encouraging them to trade more. The obvious way of doing so is to raise the chances that the investors can make a decent return for the risks they take with their money.
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Brokerages like Phillip Nova are addressing this with a steady flow of investors’ education activities, not merely on their own but in partnership with course providers, product issuers, exchanges and other key players within the same ecosystem. “You name it, we have it,” says Teyu. “And there are so many opportunities, we run out of dates.”
Given the ebbs and flows of the various markets, different products will be in favour at different times. From Teyu’s perspective, which are the ones with the most promise, besides Phillip Nova’s traditional strength in futures?
Although relatively new for the firm, CFD is a “rising star” as this product class is “along very well”. Similarly, for forex, says Teyu. Another interesting product is that of gold. While the volume is relatively low for Phillip Nova, gold is a widely acknowledged asset of interest in this high inflation environment, with its safe haven status further accentuated by the ongoing geopolitical uncertainties. “That’s one area I will be trying to focus more on,” he says.
Teyu believes ETFs are another product category investors should pay more attention to. ETFs, by their nature, are made up of equities while, at the same time, offering some measure of diversification than a single stock.
He says ETFs are particularly suitable for clients trying to invest in another market they are interested in without the actual stock picking. “You believe in the country, you like the long-term story, but there are issues, and you don’t want to buy single stocks, then you can go into ETFs.”
Likewise, ETFs are constructed according to certain industry sectors, such as technology, but span across companies of various markets. “This is one area where we’ve put a lot of emphasis, where we are trying to work together with the different ETF issuers,” he adds.
Forecasting the future
Phillip Nova has clocked up four decades in the industry. Can Teyu predict how the industry will shape up to be in the next 40 years? Instead of attempting such a prediction, he outlines his approach to achieving sustainable growth for the firm. This growth involves embracing various risks, including leveraging, for success.
Brokers can always grow “as much as” they want, but the condition is that they must be able to manage risks. After all, the industry’s history is littered with plenty of names that fell short in this regard, thereby bringing down entire firms.
“You think black swans won’t happen, but it is a fact that black swans are happening more and more often in the last 10 years,” says Teyu, listing significant market-shifting events: The pandemic, Russia’s invasion of Ukraine, negative oil prices and the Global Financial Crisis.
In a way, another form of risk management is constantly broadening the range of product offerings. Like an investment portfolio that is not overly concentrated, a broker offering a wider range of products can reduce issues if and when one area goes sour. “We will continue our momentum towards sustainable growth, grow in product breadth, grow in depth,” says Teyu.
He is mindful of the ever-changing competitive landscape of the industry, too. Hong Kong, for example, was where hundreds — if not thousands — of brokerages of varying sizes operated. But with the market downturn over the past few years, dozens have reportedly decided to call it a day and give back their licenses, as what they can earn from dwindling trading volume no longer makes sense.
Teyu believes one way to boost the sustainability of Phillip Nova is to focus on developing and constantly upgrading its operating platform, including trading, risk management, and back office so that it can be a form of long-term competitiveness encompassing the broker’s front, middle and back operations.
Compared to some firms that rely on the white-label model, this commitment to have its platform for Phillip Nova will require a certain level of spending. “Are we a platform company, or are we a financial services company? I think it should be a combination of both,” says Teyu.
He is especially proud of the firm’s risk management capabilities — something he learned throughout the years in this role. For example, he took over as the CEO during the Global Financial Crisis. “Was it a very stressful time? After that, oh, it probably is like everything is just like relatively ok — not sure whether my heart has become so strong,” jokes Teyu.
Don’t pray
Teyu says he is “really proud” of his risk management team, which, by doing their job well, is to gauge and determine if risk tolerances have been breached when clients trade, even if the trades are within stipulated limits. “Anything you want to catch, you have to catch it within the day or the next few minutes,” he says.
Amid their trading excitement, certain clients — having funded their accounts — might argue against being halted from trades marked as risky. Phillip Nova has a role in helping to protect the ecosystem, too. “If you get into trouble, how will it affect other customers? These are very hard lessons learned over the years.”
Of course, curbing clients’ exposure means curbing the firm’s trading commission. Yet, implementing such restraint is valuable due to the frequent occurrence of unpredictable black swan events, as described by Teyu. The business is about being able and willing to manage. Teyu recalls a senior in the broking industry who once shared with him: “The last thing you want to do is pray.”
Teyu believes that the SGX Group is consistently putting in place “building blocks” that will help the overall exchange and the Singapore market grow / Photo: Albert Chua
The Singapore market ecosystem’s building blocks
Even as Phillip Nova helps its clients trade a wide range of investment products quoted on various platforms, the company does not need to be reminded of where its home base is and is always working closely with the Singapore Exchange Group (SGX).
Similar to Phillip Nova, SGX has established itself as a multi-product and multi-asset platform, with most of its earnings originating from derivatives rather than traditional equities.
With equities being the most accessible asset class — and one very tied to the various companies that make up the country’s economy — there is always attention on equities. As an extension, some commentators have tied the exchange’s overall performance to the number of new listings it can attract. SGX is up against several bigger, more liquid exchanges — not just in the US but also in Hong Kong.
On the day of this interview, news broke that Mirxes, a local biotech start-up that gained prominence in the pandemic, will IPO in Hong Kong. SGX is being considered for a secondary listing - hardly a consolation prize. Attracting interesting new listings has been a long-standing challenge, not just a recent one.
When asked about a potentially concerning trend with companies like Mirxes, Teyu does not indicate so. He highlights that individual listing aspirants need to consider where they can fetch a better valuation and enjoy better liquidity, and the daily trading volumes of the various exchanges are quantifiable indicators.
Still, he acknowledges SGX’s ongoing efforts to enhance its appeal. Multiple professional teams work on refining current or introducing new offerings consistently.
For example, on May 23, SGX launched a new product, Singapore Depository Receipts or SDRs, under the Thailand-Singapore depository receipts linkage. Phillip Securities issue the inaugural SDRs and represent the beneficial ownership interest in the underlying securities of Airports of Thailand, CP All and PTT Exploration & Production, key constituents of Thailand’s benchmark SET50 Index. The SDRs are priced in Singdollar, and trading is done within Singapore hours.
Less than a month later, on June 20, SGX welcomed the CSOP iEdge Southeast Asia+ TECH Index ETF listing. The ETF, managed by CSOP Asset Management, offers investors access to Southeast Asia and India’s fast-growing digital and technology sectors.
On Aug 15, SGX launched yet another new product: Structured certificates — becoming the first exchange in Asia. Structured certificates are financial instruments issued by third parties, crafted to fulfil investors’ specific requirements, including yield enhancements and growth payoffs.
Commonly traded in Europe, the returns of these products are defined by their payoff profiles that are dependent on the performance of an underlying asset such as a single stock or equity index. The inaugural issue of structured certificates, by Societe Generale is a yield enhancement product linked to Alibaba Group Holding.
Teyu says SGX is launching these new products even as it constantly defends its turf in existing markets for trading forex and other forms of derivatives. And, of course, with more than two decades, SGX has built up a sound reputation where REITs should list.
He recognises the immediate criticisms on how SGX is seen as unattractive for listing equities. But, at the same time, while the exchange is trying to stop or even reverse the trend, it is also putting the “building blocks” on already very successful products such as ETFs and futures, where new record volumes are made often.
A handful of Singapore-based companies might have chosen to go elsewhere and therefore seen as “a bit of a setback,” but Teyu says this is a long game, and things change over time.
Even for futures trading — widely acknowledged as a bright spot — there were some doubts in the early days. “But when you do certain things, they become the building blocks, and eventually, one of them takes off; you just bring up the rest,” he says.
“To be fair to SGX, they’ve been putting things right even for equity markets. Some trends cannot be reversed immediately, but with other building blocks in place, you will see success later on.”
