SGX is a comprehensive platform offering services in equities, fixed income, derivatives, commodities, and foreign currency exchange. It was established in 1999 through the amalgamation of three distinct entities—the Stock Exchange of Singapore, the Singapore International Monetary Exchange, and the Securities Clearing and Computer Services Pte. In 2000, SGX made its shares available to public investors, and in 2008, it finalized the acquisition of the Singapore Commodity Exchange.
What bold move SGX is going to make?
SGX, the Singapore Exchange, is strategizing an assertive expansion within foreign exchange markets over the next five years, aiming to leverage efforts by local regulators to reinforce the nation’s position as Asia’s primary currency trading hub. The exchange, renowned for its dominance in Singaporean stocks and equity derivatives across the region, embarked on its foreign exchange venture in March by acquiring an initial 20 percent stake in BidFX, an online trading platform utilized by hedge funds and banks, for $25 million. It also holds an option to obtain a controlling interest.
Loh Boon Chye, CEO of SGX, described this move as an initial step in a comprehensive overhaul aimed at reducing the group’s reliance on domestic stocks and futures linked to blue-chip equities in Japan, China, India, and Taiwan. “Our diversification efforts over the last five years mean we are truly a multi-asset class: we also have forex, commodities, and fixed-income. In the next five years, we would like forex to be as significant as equity-index derivatives,” he told the Financial Times.
In the last quarter until March, SGX facilitated 5.3 million forex futures contracts, marking a 48 percent year-on-year increase but still relatively small compared to the 50 million equity derivatives traded in the same period. Turnover from its derivatives units constitutes nearly half of the group’s revenues.
Singapore’s Exchange listing
The mainboard listings on the exchange are predominantly occupied by real estate, banks, shipping, and oil and gas companies, with notable representation in consumer staples and healthcare sectors. As of 2021, the exchange boasted a total of 735 listed companies. Among them, DBS, Singtel, CapitalLandInvest, UOB, and YZJ Shipbldg SGD stood out in terms of market capitalization.
In 2018, SGX announced a collaboration with Nasdaq, Deloitte, and the Monetary Authority of Singapore (MAS) to explore the integration of blockchain technology aimed at enhancing the efficiency and reliability of tokenized assets. In a press release, SGX’s chairmen remarked, “This initiative will leverage blockchain technology to streamline funds transfer and securities transfer, mitigating risks for both buyers and sellers in the DvP process. This collaborative innovation brings together multiple stakeholders to pursue tangible opportunities that benefit the ecosystem.” Subsequently, SGX partnered with HSBC and Temasek, leading to the issuance of Asia’s inaugural public syndicated digital bond for Olam International in August 2020.
SGX won Asia’s Best FX Exchange Award
The Asia FX Awards’ seventh edition acknowledges and celebrates the top banks, dealers, brokers, and currency managers in the Asia-Pacific region (Apac). Over the past 12 months, market participants have navigated through ongoing geopolitical risks, challenging economies, divergent monetary policies, fragmented liquidity, and periods of volatility. The increased transparency and electronification of FX markets are driving further innovation, as companies strive for efficiencies, insights, and competitive advantages.
These factors significantly impact the FX market and underscore the growing importance of risk management in the months ahead. The FX Markets Asia FX Awards feature 43 categories, determined by a distinguished judging panel comprised of industry experts and FX professionals across Apac. They have closely observed firms that introduced unique and innovative approaches to address industry demands over the past year. And SGX group won the best exchange award.
The recent launch of the SGX group
The Singapore Exchange (SGX) has launched a new platform called CurrencyNode, which serves as an electronic communications network (ECN) for trading spot foreign exchange and non-deliverable forwards (NDFs). This initiative aims to capitalize on the increasing number of market-makers establishing matching engines in Singapore.
CurrencyNode operates as a centralized platform, headquartered in Singapore’s SG1 data center. It facilitates trading through a central limit order book (CLOB), which aggregates buy and sell orders from various market participants. The CLOB provides both firm and non-firm liquidity, allowing traders to execute transactions anonymously.
Additionally, CurrencyNode employs a central prime broker model, which involves a single entity acting as the intermediary between buyers and sellers, managing the risk associated with transactions. Initially, CurrencyNode will support trading for two foreign exchange pairs. This platform represents SGX’s effort to tap into the growing demand for electronic trading solutions in the foreign exchange market, offering increased transparency and efficiency to market participants.
How MAS is responding to the traders’ concerns?
Singapore ranks as the world’s third-largest FX trading hub after London and New York, as per the latest triennial survey by the Bank for International Settlements, benefiting notably from increased trading of China’s renminbi.
Nevertheless, numerous traders in Singapore have voiced grievances, asserting that they face disadvantages compared to counterparts in the rest of Asia, as some of the region’s major FX marketplaces, such as the CME Group’s EBS, are headquartered in Japan. They argue that the data transmission carrying prices and orders takes too long to traverse the Pacific. These concerns have caught the attention of the Monetary Authority of Singapore, the regulatory body, which endeavors to entice more traders to establish servers and data centers on the island through incentives such as grants.
Recently, Standard Chartered announced its decision to establish an online trading platform, complete with pricing software, in Singapore. The Asia-focused bank’s new hub, slated to commence trading in the first quarter of next year, will complement existing sites in London, New York, and Tokyo. StanChart’s plans follow similar moves announced in recent months by some of the FX market’s major players, including Citigroup, UBS, and UK electronic market maker XTX Market.
Michele Wee, StanChart’s head of financial markets in Singapore, Australia, and Brunei, stated last week that the bank witnessed a 40 percent increase in total FX trading volumes so far this year compared to the previous year.
