Singapore Exchange Ltd is proposing introducing regulations to allow the listing of Special Purpose Acquisition Companies (SPACs) or blank cheque firms that have taken U.S. markets by storm.

“The feedback we have been receiving is that an Asian SPAC would be interesting because Asia is such a fertile ground not just for target companies but also for sponsors,” Tan Boon Gin, CEO of Singapore Exchange Regulation, told a news conference.

SGX, the first major Asian bourse to consider the listing of SPACs, is calling for market feedback from Wednesday until April 28 after which it could introduce regulations by mid-year.

SPACs or shell companies, raise funds via IPOs to merge with operating firms and then take them public after offering them shorter listing timeframes and strong valuations.

SGX is proposing safeguards to rein in risks seen in U.S. SPACs such as excessive dilution by shareholders and sponsors and a rush by shell firms to merge with targets. SGX plans a minimum S$300 million ($223 million) market value for SPACs.

Hong Kong, Indonesia and other markets are stepping up efforts for SPAC listings but some industry executives say the region may not be as attractive as the United States where SPACs have already raised $97 billion this year after a bumper 2020.

“It’s clear that the SGX is targeting high-quality institutional investors even though this makes it a smaller market,” said one banker who did not want to be identified as he was not authorised to speak to the media.

“The safeguards might not be a deal-breaker for many sponsors but then again Singapore really needs to roll out the red carpet to win over SPACs,” he said.

SPACs usually offer shares with warrants attached, which entitle them to buy shares at a certain price, becoming valuable if the underlying stock price goes up.

Unlike the United States, SGX proposes that warrants cannot be detached from underlying shares, and that only those investors who vote against a business combination be allowed to redeem shares. This would help prevent what is known as free-riding, Tan said.

“Our observations showed that the SPACs that were most successful were the ones which managed two main risks well: first, free-riding by investors and excessive dilution of long-term investors, and second: the rush to do a business combination also known as a de-SPAC,” Tan said.

In U.S. SPACs, the shares and warrants may be traded separately, meaning investors can sell their shares but still benefit via the warrants if the SPAC is successful but without contributing capital to the company.

Other measures by SGX include minimum equity participation by founding shareholders and allowing SPAC mergers to be completed within three years instead of the typical two years seen in U.S. SPACs.