An Anchor in an Ever-Changing Market | Exclusive Interview with Phillip Futures’ CEO Teyu Che Chern
Teyu Che Chern, Phillip Futures’ CEO, has held a steady hand over the Singapore-based futures brokerage firm for the last 12 years, despite the changing landscape in the futures and forex trading market, and amid the ups and downs in the overall marketplace.
ZUU online met with Teyu at their office in Raffles City to learn how the company has changed in these last 12 years, and how he has managed it all.
A continuous learning process
“I always encourage the young ones to learn new things,” Teyu told ZUU online. “When time is on your side, keep an open mind. Learn everything, whether it’s a new product, a different process, or even a different platform. Take on manual tasks, operational work, risk management work, so you learn the different parts of the business.”
“Stretch yourself, enjoy what you are doing, and try your best to contribute. When you are young, you can afford to make mistakes and learn from it.”
Teyu’s entire career was driven by this same piece of advice, coupled with his constant desire to be challenged and to learn something new.
His first job, when he was 21, was as a branch manager at a local bank. The job was stable and comfortable, but Teyu wanted to stretch himself further. Subsequently, he joined Phillip Securities as a management trainee on January 14, 1998, a date he has committed to memory.
With Phillip Securities, Teyu was exposed to the workings of the stock broking business, from financing, to back office operations, and POEMS (Phillip’s Online Electronic Mart System) the pioneering online trading platform in Singapore.
Once he was familiar with Phillip Securities, an opportunity opened up for him to join Phillip Futures. Keen for a new challenge, Teyu decided to make the switch.
The change opened him up to a whole different trading environment. From local equity markets operating 9 to 5, he was thrown into a global 24-hour trading environment, and he took the opportunity, as a management trainee once again, to learn about futures trading.
He became the director of Phillip Futures in 2006, and has helmed the business since.
Witnessing the digitization of the futures market
Phillip Futures was established in 1983, as one of the founding clearing members of the Singapore Exchange Derivatives Trading (SGX-DT).
Under Teyu’s leadership, the group has consistently been looking at ways to expand its business, while providing added value to its customers.
When CME (Chicago Mercantile Exchange) Group set up its very first telecommunications hub in Singapore in 2005, Phillip Futures was among the first three companies to tap into the CME Globex electronic trading platform.
Teyu explained that being part of CME Globex allowed Phillip Futures’ customers access to “faster trading speeds, improved latency and better efficiency of trading”. “Our investment into technology is one of the key things that we have had to do to stay ahead of the curve,” explained Teyu. “Then the other part was to recognize that Singapore is a small market. With our population size the only way to go is regional.”
Under Teyu’s supervision, Phillip Futures has moved from a largely Singapore based company to one with a much bigger scope and scale.
Singapore forms a small part of Phillip Futures’ total trading volumes, with the rest coming from outside of the country. Retail business represents a mere portion of overall volume. Majority of its business comes from institutional investors, financial institutions and professional traders as well as companies doing physical hedging.
The group currently holds 27 clearing memberships, the most number of any brokerage in the region, including clearing memberships in US, Japan, Hong Kong, Thailand, Singapore, Malaysia, Indonesia, India, and Dubai.
“We probably have even more memberships than a lot of the international players,” Teyu said with a grin. “Certainly a huge part is because of our presence in Asia. That’s why we see ourselves as an Asian firm with a global reach.”
Staying ahead by creating value for customers
One of the things Phillip Futures has done, which stands out from its local peers, is its adoption of the MetaTrader 5 trading platform while others continue to trade on the MT4.
“We always have to think about how to create value, and for that, we just have to listen to what customers want,” said Teyu. Phillip Futures found that a lot of traders were adopting the Metatrader 4 and 5 platforms both regionally and globally, along with the growing interest in algorithmic trading. The decision to adopt MT5 instead of MT4 was due to its ability to handle multi-asset trading, besides forex. “Our intent is to launch forex as the first product, and after a while we will expand into other products, using this platform.”
However, staying ahead of the competition goes far beyond introducing a new popular trading platform. Phillip Futures has had to look inward to improve its business processes, in order to increase productivity, reduce operational costs and human error.
For instance, the group managed to reduce the time taken to generate reports for a margin call from 2 hours, to under 10 minutes. “With all that time freed up, our dealers could move towards higher value added jobs like portfolio management, or risk management, or providing risk advisory.”
One area which Phillip Futures has had to revamp, is in the area of account openings. “We know that when our customers open an account, they want it instantly. But knowing it and being able to implement it immediately are two very different things altogether. There is a standard account opening process with certain things to check.”
Teyu points out that financial companies in Singapore like Phillip Futures have to follow strict Know-Your-Customer (KYC) and Anti-Money Laundering (AML) compliance guidelines set by MAS. These checks prevent Phillip Futures from allowing immediate account openings.
For now, the group has already automated the rest of the process, from building an online account opening form, and integrating it with an online payment system that provides automatic currency conversion.
“It’s always difficult to make changes because there are a lot of legacy processes, but we know our customers’ needs and that cannot be an excuse anymore. Plus, in any industry, there is always the threat of margin compression.”
“Faced with this margin compression, how do we change the processes, such that we reduce the supporting cost to a bare minimum? I will say it is still a work in progress. And there’s more that we need to automate,” says Teyu.
On the other hand, Teyu makes clear that Phillip Futures continues to be very prudent amid its business expansions and innovations. “In the financial industry globally, sometimes we’ll see companies that appear to be doing well, having a crash landing. So as much as we try to innovate, break new ground, the important thing is how we run a tight ship in managing operational risk,” he says. “I have a team of 10 people just looking at risk itself, like liquidity risk, market risk, or credit risk, because when we don’t manage our operational risks, we will be in trouble.”
Teyu’s Personal Investment
For someone who is so familiar with the business of forex and futures, Teyu doesn’t trade either of them. And neither does his team at Phillip Futures.
“There is a direct conflict of interest, so we don’t trade in futures and forex. If we want to invest on a personal level, we will invest in stocks. In fact, all our colleagues don’t trade in futures and forex here,” he explained. “It’s a company-wide decision to avoid any conflict of interest.”
So what stocks does he invest in?
Teyu tells ZUU online that he invests in agricultural stocks like Wilmar International because of its strategic position in the industry. Wilmar has a market leading position in edible oils refining in countries like Indonesia, Malaysia, and China, and is also the largest producer of consumer packed oils in India, Indonesia and Africa.
At the same time, Teyu invested in Sembcorp Industries, after the stock was oversold during the oil & gas sector downturn. “My investment in stocks is very passive,” Teyu admits. “I just buy and keep undervalued stocks like Sembcorp, and hope it can beat the inflation index and be a form of savings for my children’s education.”
He also invests in Singapore Exchange, because of his line of work. “SGX is something that I know a bit better, and they can feel the pulse of the market.”
“That’s how I would invest. Either in something that is undervalued, or something that I know a bit better. If it’s something that I don’t follow enough, if it’s something I don’t understand, I won’t just go in and make the investment.”
Another interesting stock that Teyu invests in is the dental chain Q&M Group, despite his lack of knowledge in the industry. His investment was purely based on dollars and cents. “Do you notice how every time you need to see the dentist, the queue takes weeks? I believe that’s a sign of a consistent demand.”
“Since I am going to spend so much on dental expenses, I believe they are going to make money. And hopefully, maybe I will have some dividends or some capital gains that can help me pay for the expenses I will potentially incur for my four kids,” he said laughing.
An invaluable investment
Teyu’s best investment is, incidentally, also one of his cheapest.
“I invest in books,” he said. “Things are happening so fast now, with artificial intelligence and blockchain, that there’s always the possibility of being obsolete. So, whether as a company, or on a personal capacity, how can we continue to add value to ourselves, so that we remain relevant?”
“I like reading books because it keeps me updated. I also read a lot of magazines, but there’s a difference. Magazines keeps me updated on things that are happening now, books go more in-depth into concepts.”
Teyu is currently reading Outliers by Malcolm Gladwell and plans to tackle Edward de Bono’s Lateral Thinking next. A particularly poignant book he completed recently was Machine, Platform, Crowd, by Andrew McAfee and Erik Brynjolfsson, which discusses some of the latest trends in disruptive technologies.
“In light of margin compression in any industry, if there are only ten companies that can dominate in the world, how do we ensure that we are one of the firms that can survive, based on what we are doing?”
Another book which is a recommended reading and inspired Teyu in his management style is Built to Last, by Jim Collins and Jerry I. Porras, which studied the successes of a number of visionary companies, including 3M and American Express.
“If a company is going downhill – like a sinking boat – even if the captain likes you the most, you will have to go eventually. But on the other hand, if you are in the right company, in the right expansion phase, a rising tide will lift up all the boats.”
“As the company grows, we need all the team players to grow with us to make sure the company continues to have the competitive advantage in the marketplace.”
So why does he enjoy reading and encouraging others to do the same?
“When everyone studies the same textbook, why does one person get a better score than others? It could be their innate nature, but behind the success there could also be a lot of additional hard work,” he explains.
“When it comes to work, I also believe in the same thing. If other people are putting in nine hours, and you are putting in 11 hours with a lot of additional reading, these will build up your knowledge in the related industry and will serve your career well.”
Where does Teyu see Phillip Futures in the next 35 years?
Teyu points out that the group has been laying the foundation of the company in its first 35 years, by adding more trading platforms and catering to more diverse client segments. The group continues to expand on its business scope, to include physical commodities like coffee, in order to continue to provide for its customers’ needs.
The constant improvements and changes in Phillip Futures is part of why Teyu continues to enjoy his job. “That’s the fun part about being in Phillip Futures, if it’s going to be same type of business, same type of volume, with no new challenges, I think life will be a little bit boring.”
Within this year, things are already changing for the company. Phillip Futures was one of the first clearing members of Singapore’s third commodities exchange, Asia Pacific Exchange (APEX) which started trading in May. The first two commodities exchanges are Singapore Exchange (SGX), and Intercontinental Exchange (ICE).
Phillip Futures has also joined the two Chinese exchanges that are undergoing internationalization, which allows the participation from foreign investors. The two exchanges are namely Shanghai International Energy Exchange (INE) and the Dalian Commodities Exchange. Teyu believes China will be the next growth area for the group as the two exchanges, and others, continue to open up to international trade.
In fact, with all the changes that are happening now, he expects Phillip Futures to be vastly different from what it is today in the next 35 years.
“We are a company that is still transforming,” Teyu summed up.