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SGX’s Asian FX futures volume rises as FX industry moves toward the final stages of regulatory reforms



SGX

Singapore Exchange (SGX) keeps reporting record volumes, as international investors seek trading opportunities in Asia. The heightened activity is not that unexpected, as the FX industry moves toward the final stages of regulatory reforms for uncleared OTC derivatives.

Interest in SGX’s suite of Asian currencies continues to grow, with record US$1.3 trillion changing hands in 2019, up 44% YoY.

  • Aggregate open interest as at end December 2019 stood at US$7.89 billion, up 90% y-o-y, underscoring strong liquidity.
  • Trading volume was about US$126 billion in January 2020,on a notional basis, with close to 2 million contracts traded.

KC Lam, Head of FX and Rates, SGX, said:

Asia leads global growth but it is a dynamic region with disparate country risks and trends. Our clients look for price discovery, liquidity and transparency for both OTC and listed futures trading across Asian FX. Today, on-exchange trading volume of Asian FX futures is a small fraction of the FX derivatives that are traded OTC each day. There is a huge opportunity for the OTC market to be ‘futurised’, given regulatory developments and technological advancements.

Preparing for global regulatory changes

With Uncleared Margin Rules (UMR) continuing to phase in this year and next, the FX industry is gradually moving towards centralised clearing to lower margin costs and capital requirements.

SGX continues to help OTC clients bridge to centralised clearing through its customisable FlexC FX Futures, as more investors look for greater efficiencies. FlexC FX Futures is an innovative feature that allows market participants to trade customisable FX futures in a bilateral OTC manner and clear the transactions on SGX. Since its first pilot trade last year, SGX has cleared over US$123.2 million in FlexC FX trades. It has also recently brought onboard four new clearing members who can clear FlexC FX futures – HGNH International Financial (Singapore), INTL FCStone, SG Securities (Singapore) and UBS AG – making it 10 in total.

We see a number of clients that have been trading OTC, also starting to trade listed FX futures as the deadline for phase 5 of the Uncleared Margin Rules draws near. FlexC FX Futures were developed in consultation with market participants, to help them enhance operational efficiencies while retaining bilateral trading relationships. To further bridge the OTC and listed futures markets, we have also just launched our suite of listed Asian FX futures alongside the OTC products offered on BidFX’s platform,” added Mr Lam.

Last year, SGX became a strategic investor in BidFX, a specialised trading platform for global FX markets. Last month, several BidFX clients, including London-based CdR Capital Ltd, successfully traded SGX FX futures on BidFX’s OTC digital platform, with seamless clearing by SGX.

BidFX’s global clients can now access multiple pools of FX liquidity with the option to have bilateral counterparty or centrally cleared FX exposures, all in one platform and single workflow management system.

Jean-Philippe Malé, CEO of BidFX, commented:

We are delighted to introduce a more efficient way to trade across both FX OTC and futures markets. This new development will not only enable our customers to access additional liquidity, but it will also connect them to a leading clearing house ahead of increased capital regulations.

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SGX’s Asian FX futures volume rises as FX industry moves toward the final stages of regulatory reforms

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