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Looking Ahead: On Reform, iSTOX And COVID-19

Over the last past month or so, we have witnessed unprecedented events in the financial markets that wiped more than US $5 trillion from global stock markets and caused massive economic dislocations that will take months, if not longer, to recover from.

The damage is being exacerbated because the intricate supply chains and intermediaries that we previously relied upon cannot perform as designed in a world dealing with a global pandemic. Impacts range from workforces suddenly being forced to work from home to entire industries and countries being locked down. For many, the pain will be magnified due to over-leveraged companies and overly complex financial products. The consequences — in terms of loss of life, loss of jobs, and companies forced to close — will be real and painful.

Directly or indirectly, this is something that will impact all of us, if it hasn’t already. It will be incumbent on each of us in the coming months to find ways to help each other in big ways or small.

“It is also important for each of us to remember that our modern world was built and defined by the challenges we faced head on and the ways we have found to overcome them. Major disruptions — pandemics included — can, in the long run, lead to innovation, reform and renewal as new and better systems emerge to replace the old.”

As The Economist recently pointed out; one of the most important changes to come out of the devastation caused by the Black Death in Europe was to put a feudal society on the path to modernisation. For example, the sudden scarcity of ordinary workers relative to acreages of farmland resulted in a big jump in worker’s bargaining power. Likewise, incomes of European workers rose dramatically in the years following the plague. Academics argue that this jump in income resulted in more spending on manufactured goods from cities, and thus to higher rates of urbanisation. As the article notes, “the plague effectively shoved parts of Europe from a low-wage, less urbanised equilibrium on a path more congenial to the development of a commercial, and then an industrial, economy.”

So, what are the likely long-term economic outcomes of COVID-19? To start with, the pandemic has clearly exposed the danger the financial industry can hold for the global economy in terms of overleveraged and overly complex financial instruments. At a time when leaders and policy makers need to focus on complex real world health and economic issues, they must instead divert attention to malfunctioning capital markets, lest the world financial system seize up.
The efficient allocation of capital to deserving projects is a crucial, non-negotiable function of a global economy. At a time where intermediaries between buyers and sellers need to rethink their business models, the financial industry, as a core pillar of this economy, will wake up to the importance of finance platforms that can stay open in such a crisis.

Cloud-based services like Amazon (a partner of iSTOX via their subsidiary AWS) are showing the world that they can not only survive but thrive in the face of society-wide disruptions. Likewise, cloud-based capital markets players will emerge and play an important role in the recovery. These players will focus capital on growing the real world economy and bring capital directly to deserving projects without the need for intermediaries. More importantly, capital markets players will be able to leverage on technology to stay open, despite the global pandemic situation.

To this end, iSTOX plans to push ahead with its vision for a more resilient, accessible and open private capital markets issuance and trading platform in 2020. As part of our efforts, we’re proud to announce we’ve just completed our second issuance, raising over S$10 million in what may be the most challenging market conditions of the past decade. This was achieved by directly connecting investors to investment opportunity and by making the entire process seamless. At a time of safe distancing measures, our investors can register, learn about issuances through on-demand roadshows, invest and trade online — all in the comfort of their homes.

When we started iSTOX, we dreamed of creating something better for capital markets. In a post-COVID-19 world, I feel that need will be greater than ever.