SGX plots Asian derivatives dominance

The Singapore Exchange has announced a series of initiatives designed to build its derivatives business and expand its reach across the Asian region.

The Singapore Exchange (SGX) has announced a series of initiatives designed to build its derivatives business and expand its reach across the Asian region.

The bourse has entered into memorandums of understanding with the Korea Exchange and Philippines Stock Exchange (PSE) with the aim of strengthening the derivatives market in each country.

The PSE partnership will include joint development and promotion of Philippines futures and options to help facilitate international investment, with index futures based on the MSCI Philippine index the first product to be launched on SGX by Q4 2013, subject to regulatory approval.

Both markets will also explore the opportunities for listing a wider range of derivatives on PSE in the future.

“With this futures contract, investors are assured of an efficient and effective risk management tool as they tap opportunities offered by the Philippine economy,” said Magnus Böcker, CEO, SGX. “The addition of this contract also builds upon SGX’s offering of a one-stop access into Asia’s key capital and growth markets.”

In Korea, SGX plans to collaborate with the domestic exchange to develop clearing for OTC derivatives legislation, as both markets continue to implement swaps market reforms as per the G20 agreement.

SGX has been clearing OTC financial derivatives since November 2010 and has cleared US$300 billion notional of interest rate swaps and non-deliverable Asian FX forwards. Korea plans to start clearing swaps during the middle of this year.

“This collaboration will explore possible synergies to better meet the needs of market participants, particularly in the Singapore and Korea markets,” said Ho-Chul Lee, president and COO of KRX. “International awareness of Korea and Singapore OTC derivatives markets will grow, thereby helping us to increase participation levels.”

OTC derivatives trading reforms that are currently taking hold across the globe will lead to more swaps being traded on exchanges or exchange-like venues and passed through central clearing. Regulators also want to improve the transparency of the swaps market through new trade reporting obligations.

Listed derivatives expansion

SGX is also moving forward on plans to expand the range of instruments on its listed derivatives market, including through a new partnership with global index provider MSCI for 14 new regional and country indices. The partnership means SGX has licensed a total of 19 MSCI indices, offering investors access to about 90% of the MSCI AC Asia Index by market capitalisation.

The new indices are components of broader regional indices like the MSCI Emerging Markets index, covering Thailand, the Philippines and other country markets, and the MSCI Frontier Markets index.

“SGX’s customers can look forward to a new and more comprehensive selection of hedging and trading opportunities including new country exposures,” said Michael Syn, head of derivatives, SGX.

In addition to expanded cooperation with MSCI, SGX also plans to launch new currency futures, with FX products based on Australian dollars, US dollars, Japanese yen and Indian rupees scheduled for Q3 2013 launch.