Make room, world. The Singapore exchange is moving in. SGX, the Asian giant, seeks to establish its place in the global marketplace over the next five years, now that thanks to its local regulators it has firmly established its position as Asia’s largest hub (and the world’s 3rd largest) for FX trading.
With an option to secure a controlling interest if desired, the exchange bought a twenty percent stake in BidFX, the hedge funds and bank trading venue, in March of 2019. The price was a measly $25 million, and buys the exchange its first step towards escaping its reliance on local stocks. According to SGX’s chief executive, Loh Boon Chye, this is the beginning of a reform that will also secure a future of surveying blue chip stocks in China, Taiwan, Japan, and India.
From December to March, SGX dealt with over 5.3 million of futures contracts. While This number may pale in comparison to the money handled by similar, larger exchanges worldwide, it is still nearly a 50% increase to where the exchange was last year. This explosive growth is indicative of the upward trend of the exchange, most clearly exemplified in their aggressive new global strategy.
What may limit that growth is the current trends that already in place worldwide. The Asian trading region in particular has many of its largest marketplaces involving FX trading based in Japan. It is the belief of SGX that the transmission of data across the Pacific moves too slowly and inefficiently for the exchange to be truly up to date on trading information. Frustrated workers argue that this puts them at a clear disadvantage to traders who are based in a more centralized location. As a result, the Monetary Exchange in Singapore is seeking grants from the government to set up localized servers. Such servers will enable traders already on the island to be at the same startling line as other Asian traders.
Standard Chartered, the financial institution, also recently announced that it had plans to lay plans for a trading platform that would be based on Singapore itself. It is the latest in a string of institutions that have made clear similar intentions, namely UBS, XTX Market, and Citigroup. Such lustrous names establishing themselves in Singapore may aid the island’s trading presence, and help to elevate its increasingly inflating reputation.
However, the behavior of these institutions may be due to change soon, based on new laws encompassing derivatives that are off-exchange. Banks may find themselves pursuing cheaper options than what SGX can currently offer. This is an additional disadvantage that SGX must overcome if they wish to establish themselves on a global scale, in addition to the current lack of SGX data stocks that are available. With only 640 mainboard listings, they are currently striving to compete against exchanges with greater resources and much firmer foundations. However, if they are successful, then they have the possibility of becoming another formidable exchange that financiers must familiarize themselves with.
The following video delves deeper into the strategies of SGX:
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- https://www.ft.com/content/80594be6-8b5a-11e9-a1c1-51bf8f989972
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