SGX lays out plans for new FX futures products

SGX FlexC FX Futures allows customers to trade FX futures in OTC fashion which can be cleared on SGX’s platform.

Singapore Exchange (SGX) has confirmed plans to launch a new foreign exchange (FX) futures product as it seeks to modernise its over-the-counter (OTC) offering.

Due to launch later on 27 August, SGX FlexC FX Futures provides market participants with the ability to trade customisable FX futures in an OTC manner and clear the trades on SGX’s platform.

The FX futures are bilateral trades which are privately negotiated with expiration dates that are registered and cleared like a standard SGX FX Futures contract.

“Access to counterparty credit, especially for tenors longer than spot, is increasingly scarce and expensive in the OTC FX markets,” commented Michael Syn, head of derivatives at SGX, who said the launch is aimed at encouraging a broader adoption of price risk management in Asian FX.

“We have worked with market participants to bring the efficiencies of futures market infrastructure into Asian FX.”

SGX added that with FX markets moving towards central clearing, the new products will offer an effective way of improve operational efficiencies, reducing costs and counterparty credit risk, while ensuring bilateral trades relationships are maintained.

“FlexC FX offers futurised client-clearing, bringing the surety of SGX’s market-leading CCP to existing bilateral credit relationships, and expanding opportunities for improved Asian FX price discovery and risk management workflow,” Syn added.

Firms currently working alongside SGX and supporting the exchange with the FlexC FX Futures include BidFX, TradAir and TFS Derivatives in Hong Kong.

“We see great potential in utilising SGX FlexC FX Futures solution to remove existing frictions in the OTC FX markets for currency pairs associated with INR, KRW, TWD, CNH and  SGD so that market participants can continue to enjoy an unparalleled level of growth as experienced in the past few years,” said co-founder and CMO at TradAir, Ayal Jedeikin.