Open interest derivative positions hit a record high on the Singapore Exchange (SGX) this week as the market operator continues to benefit from a broad flight to quality, said SGX chief executive Magnus Bocker.
"Singapore's showed that the model worked," Mr Bocker said yesterday at the Futures Industry Association Asia Derivatives Conference in Singapore, referring to SGX's focus on building a safe derivatives clearing house.
The total number of open-interest positions on SGX stood at about 2.65 million contracts as at the end of Tuesday, the highest ever for the exchange.
Two contracts - the China A50 and MSCI Indonesia index futures - also hit record highs in terms of open-interest positions and trading volumes, according to information provided by SGX.
Open interest positions are overnight positions that have not been settled.
The fact that more traders are leaving open positions overnight at SGX is a testament to the confidence that market participants have in the robustness of SGX's clearing system, SGX head of derivatives Michael Syn said on the sidelines.
"It is fundamental to us that we must have one of the safest, if not the safest, clearing house in the world," he said.
Global investors have been drawn to SGX because of a diversified regional suite of products as well as strong and internationally compatible regulations that make cross-border transactions easy, Mr Syn said.
"The combination of these two factors has led to us being probably one of the few exchanges these year that have seen growth," he said.
"Most other derivatives exchanges around the world have seen quite dramatic falls of between 10, 20 or even 30 per cent in their products."
Derivatives trading and clearing contributed about $45 million, or 28 per cent, of SGX's revenue in its fiscal first quarter ended September.
Year-on-year, the derivatives business saw revenue increase by about 5 per cent, outperforming rival exchanges such as Hong Kong Exchange, Australian Securities Exchange and Chicago Mercantile Exchange.
Average month-end open interest grew even stronger, up by 45 per cent year-on-year during the quarter.
Mr Syn expects trading volumes to remain muted for the next half a year because of ongoing uncertainties on the regulatory and macroeconomic fronts.
The wave of policy changes washing through the financial markets, especially, has been pushing many investors to the sidelines, he added.
"That is not a natural investment environment," Mr Syn said.
"Because you no longer take a view as an investor as to what the market's going to do. You actually now have to second-guess what the politician or the regulator is going to do. So if you fast forward that a little bit three to six months, it is not clear to me that that will change."
But looking beyond that, he was confident that underlying demand was simmering below the surface.
"Once that environment is passed, I think there's a lot of pent-up underinvestment," Mr Syn said.