Singapore Exchange tightens grip on Asian derivatives market

SINGAPORE - Singapore Exchange Ltd has announced two new tie-ups with other Asian bourses and disclosed plans for a number of new trading products as it tries to strengthen its position as the region's top exchange for derivatives.

Southeast Asia's largest exchange said it has signed a deal with Korea Exchange to explore how they can collaborate on derivative clearing services, a move that comes as Asian countries grapple with how to bring in global reforms to the over-the-counter swaps markets.

The two bourses said they were looking at possible ways their users could take advantage of each others' facilities for over-the-counter derivatives clearing.

Regulatory reforms around the world are trying to push the trillions of dollars in over-the-counter derivatives that are traded every day to be centrally cleared to try to reduce the level of risk they pose to the financial system.

Half a dozen Asian exchanges have launched, or are launching, clearing houses, leading to concerns there will be too many such facilities in the region.

While the region has some of the world's fastest growing economies, its derivatives markets are still a fraction of the size of those in Europe and London.

The move by Singapore and South Korea could ease banks'concerns that they will either have to invest significantly in becoming members of all of the regions' clearing houses or else withdraw from certain markets.

The release was one of a number of announcements Singapore Exchange made at a derivatives industry conference in Boca Raton in Florida.

It also said it has signed an agreement with the Philippine Stock Exchange to develop derivative products together.

Singapore is planning to launch a Philippines index futures contract, based on the MSCI Philippines index, by the fourth quarter of this year.

The Philippines has the best performing stock market so far in Southeast Asia this year, rising nearly 17 per cent.

Additionally, Singapore is going to start offering foreign exchange futures in the third quarter of this year, provided it gets the nod from the regulators.

The exchange is planning to offer trading and clearing of futures in four currency pairs: Australian dollar/US dollar, Australian dollar/Japanese yen, Indian rupee/US dollar and US dollar/Singapore dollar.

"The introduction of FX futures for trading and clearing is SGX's response to strong client demand for currency management tools to complement its suite of highly liquid Asian equity derivatives," the exchange said in a statement.

The bourse has also extended a licensing agreement with index provider MSCI so investors can now trade 14 additional indices including ones linked to Thailand and the Philippines.