SINGAPORE - Singapore Exchange (SGX) is discussing with brokers and could have single-stock options in the next 15 to 18 months now that technological constraints have been lifted, SGX president Muthukrishnan Ramaswami said yesterday.
The exchange also hopes to gain US recognition as a clearing house within the next couple of months, which will allow US customers to once again add to their positions in Singapore's iron ore swaps market, Mr Ramaswami said.
SGX recently shifted to a new information technology infrastructure that is expected to streamline operations and lower transaction costs.
"The key thing was to get rid of the back-end mainframe, which was a big constraint, which we've done," he said.
"And now we've got to get a plan out there. And we're working with the brokers on when is the right time and how do you do it."
Mr Ramaswami did not expect the single-stock option market to be an earthshaking business because of the size of the Singapore securities market in general, but he believed it would offer enough opportunities for investors to add some liquidity.
"It creates demand," he said.
"Today the only way you can make money on a stock you're holding is either by selling it or on the dividend. But if you have an option market, you can write a call. Suppose you're sitting on DBS, you think it's going to $15 or if it's at $15 you want to sell, you can write an option. And if it doesn't go to $15 you still make some money. If it goes to $15 you've got the price you wanted."
SGX has also applied and is awaiting recognition from the US Commodities and Futures Trading Commission (CFTC) as a derivatives clearing organisation, said Mr Ramaswami.
The lack of that designation put a damper on SGX's iron ore swaps market - which clears more than 90 per cent of the world's iron ore swaps - in October as new CFTC rules prevented US customers from adding to their positions on non-recognised clearing houses.