US investors are now able to directly trade FTSE China A50 and MSCI Asia APEX 50 futures contracts from within the US, via the Singapore Exchange (SGX).
The move comes after US regulator the Commodity Futures Trading Commission (CFTC) announced its official support to the contracts on 27 January, allowing them to be offered and sold in the US for the first time.
The SGX-listed FTSE China A50 futures contract has been identified by brokerage firm Newedge as one of the best ways for non-domestic firms to gain exposure to China’s domestic A-share market. Some 3.1 million FTSE China A50 futures contracts were traded on SGX in 2011, six times that of the previous year.
The MSCI Asia APEX 50 futures contract is a tradable proxy to the broader MSCI AC Asia ex-Japan Index, a benchmark index commonly used by investors in Asia.
Normally, foreign institutional investors need to obtain a qualified foreign institutional investor (QFII) licence from the Chinese authorities before they can trade in China. The licence is subject to strict requirements and availability is limited by government quotas.
“With Asia’s growth story standing out amid the ongoing economic slowdown in the west, US investors seeking opportunities in the east will benefit from the CFTC’s decision,” said Paul Davies, chairman of trade body the Futures Industry Association Asia. “This approval will also make such listed derivatives more widely available at a time when investors are increasingly concerned about counterparty risks and the mitigation of such risks.”
SGX extended its trading hours by removing its traditional lunch break on 1 August 2011. The SGX derivative market currently trades 17 hours daily, which it claims is the longest opening hours for any Asian exchange. In its quarterly results, SGX also reported a rise in the trading of derivatives that give investors access to other Asian markets – with Chinese A50 futures contracts, Japanese Nikkei 225 options and Indian Nifty contracts leading the growth.