Singapore Exchange Limited

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Singapore Exchange, Ltd.
SGX gradient logo.jpg
Founded 1999
Headquarters Singapore
Key People Loh Boon Chye, CEO; Muthukrishnan Ramaswami, President
Products Derivatives, Equities, AsiaClear OTC platform
Website www.sgx.com

The Singapore Exchange (SGX), created in 1999, is a multi-asset class equities and derivatives exchange, one of the largest in Asia.

SGX ranked 23rd among global derivatives exchanges by volume in 2016, with 172.4 million contracts traded, down from 183.8 million contracts a year earlier, according to Futures Industry Association annual volume figures.

SGX is also the first Asian clearing house to clear OTC traded financial derivatives comprising interest rate swaps and non-deliverable Asian foreign exchange forwards.[1]

Background

The SGX was created on Dec. 1, 1999, following the merger of the Stock Exchange of Singapore and the Singapore International Monetary Exchange, and successfully demutualized and listed its shares on its own bourse in December 2000. Five years later SGX expanded into commodities trading through a joint venture with the Chicago Board of Trade called the Joint Asian Derivatives Exchange (JADE). Later that year the SGX re-launched Catalist, its second listing board for faster-growing securities that was previously known as SESDAQ.[2] In 2009 SGX formed a joint venture with Chi-X Global to launch the world's first exchange-backed dark pool due to commence in mid-2010.

SGX acquired the Singapore Commodity Exchange (SICOM) in June 2008.

In 2009 the SGX was officially recognized for its outstanding over-the-counter (OTC) derivatives market, SGX AsiaClear, by receiving its second Asia Exchange of the Year award from Energy Risk magazine.[3] In granting the award, presenters cited the SGX's new product innovation in areas such as clearing mini fuel oil contracts and OTC cleared iron ore swaps. SGX AsiaClear, launched by the SGX in 2006, is Asia's only OTC clearing platform for traded derivatives and currently boasts 424 counterparties.

SGX also entered into several agreements with other exchanges, including a deal in mid-2009 with Norway's Oslo Børs (Oslo Bourse) to co-operate on secondary listings in energy, oilfield services and shipping.[4]

Later in 2009, the SGX announced a joint market-development agreement with Taiwanese exchange GreTai Securities Market as part of SGX's "Asian Gateway" strategy for market growth.[5] The SGX forged joint ventures with exchanges in India and Taiwan and plans to be the world's first official trading exchange to back an investment dark pool.

In July of 2012, SGX and Securities Investors Association (SIAS) announced they would sign a memorandum of understanding (MOU) to formalize their commitment over the next three years to bring investing to the community.[6]

On January 02, 2014, SGX-DC, the clearing arm of SGX became the first Asian firm to be granted registration as a Derivatives Clearing Organization by CFTC. It enabled US persons to clear onshore in Singapore with SGX-DC all swaps the central counterparty (CCP) currently clears. SGX clearing members not registered with the CFTC as Futures Commission Merchants can continue clearing swap contracts for US persons via SGX-DC, following an extension of the no-action relief letter from CFTC to March 31, 2014.

In addition, SGX-DC and SGX's securities clearing house, The Central Depository, had also applied to the ESMA for recognition as a third party CCP in order to continue providing clearing services to European Union customers. [7]

In May of 2014 SGX hired Ringo Chiu, former CEO at Citic Securities International, to head a new office in Hong Kong focused on derivatives. [8]

Products

SGX offers trading in securities, derivatives and commodities, and also offers clearing and settlement of swaps. Additionally, SGX offers market data and access services, as well as depository and broker services to all SGX securities members. SGX introduced Asian foreign exchange futures for six currency pairs, AUD/USD, AUD/JPY, USD/SGD, INR/USD, KRW/USD and KRW/JPY, on November 11, 2013. [9]

On March 5, 2014, SGX announced that its three index futures contracts based on the SGX MSCI Thailand Index, SGX PSE MSCI Philippines Index, and the SGX MSCI India Index, had been certified by the CFTC. The contracts are now directly offered for trading in the U.S. [10]

On March 12, 2014, SGX announced it would introduce a new set of Asian currency futures to expand its existing suite of foreign exchange futures. The new set will include currency futures contracts on Chinese renminbi (RMB), Japanese yen and Thai baht. The exchange plans to introduce the new currency futures in the third quarter of 2014, subject to regulatory approval. [11]

In May 2014 the exchange said it would launch nine more commodity derivatives contracts over the next two months in coal and iron ore. Iron ore futures are its most active commodity derivatives contract.[12]

In November 2014, the Singapore stock exchange announced plans to begin a bond-trading platform by the middle of 2015. It will begin by trading Asian corporate bonds in G-3 currencies and follow that with Asian local currencies. SGX formed a unit, SGX Bond Trading, to offer the products and signed a contract with technology provider TradingScreen.[13]

In January 2015 it was reported that the exchange was in talks with the China Securities Regulatory Commission to begin trading Chinese equity-index options, beginning with options on the FTSE China A50 Index. [14]

In October 2015, SGX launched the Asian liquefied natural gas (LNG) spot price index, SGX LNG Index Group (SLInG), together with its subsidiary Energy Market Company (EMC) and later launched cash-settled SLInG LNG swaps and futures to address the growing need for risk management, and also to support the continued growth of LNG trading in Asia.

On August 29, 2016 SGX launched the SGX APAC ex Japan Dividend Leaders REIT Index, composed of 30 real estate investment trusts (REITs) across the Asia Pacific ex Japan region. It will be the first SGX index to be used as a benchmark index for a new exchange-traded fund (ETF) issued by Phillip Capital Management. It is composed entirely of REITs in the Asia Pacific region that are dividend weighted.[15]

Contracts Listed

Technology

The Singapore Exchange finalized a deal on Nov. 7, 2013 with the London Stock Exchange Group's MillenniumIT to supply the technology for an upgrade of SGX’s securities clearing systems. The agreement will process deals in cash products such as equities and bonds. [16]

SGX has an arrangement with Nasdaq to use its Genium INET technology to support the SGX trading and clearing platforms, beginning in late 2016.[17]

The exchange expanded its reach into the US market with a technology deal with the CME Group, which uses CME's data facility in Aurora, IL as an access hub to directly connect North American SGX customers to SGX. The deal, announced in November 2015, allows customers to offset positions on a number of contracts between SGX and CME Group, with 24-hour trading access and risk management. SGX also has data center links with other exchanges such as the Australian Securities Exchange, Eurex, Hong Kong Exchanges & Clearing and Japan Exchange Group.[18]

Cross-Trading Agreement with CME

Beginning in 1984, the SGX and CME established a mutual offset system agreement, giving market participants the choice of clearing Eurodollar, Euroyen Futures and yen-denominated Nikkei 225 futures at either CME or SGX. Prior to CME's trading hour expansion, traders could shift from one platform to another, essentially opening a 24-hour trading day for the three contracts.

Volumes

Year Total Annual Volume* Percent Change
2016 172,421,585 (-)6.2%
2015 183,870,944 52.7%
2014 120,398,368 7.4%
2013 112,077,267 39.1%
2012 80,548,318 11.4%
2011 72,119,650 17.1%
2010 61,593,687 16.0%
2009 53,237,389 --

2016

Exchange Volume Percent Change
Singapore Exchange 156,802,499 (-)10.9%
SGX Asiaclear 15,619,086 97.2%
Singapore Exchange Ltd 172,421,585 (-)6.2%

Key People

SGXOrgChart.jpg

Initiatives

The SGX has continued its trend of linking up with exchanges well beyond its shores to add trading volume and value. In March 2010 SGX joined with the National Stock Exchange of India (NSE) in a memorandum of understanding (MOU) to develop further NSE-linked products for listing on the SGX similar to its deal to list S&P CNX Nifty Futures, which has traded in Singapore since 2000.[19] As well as adding products, the SGX and the NSE will also explore bilateral trading links to allow the users of one exchange to also trade the other exchange seamlessly.

In February 2010, a handful of ASEAN countries including Singapore chose NYSE Technologies for the technology that would link their respective exchanges for growth in the region. The Singapore Exchange, the Stock Exchange of Thailand, the Philippine Stock Exchange, Bursa Malaysia and the Indonesia Stock Exchange are involved in the project. [20]

In October of 2010, the Singapore Exchange and the Australian Securities Exchange entered into a merger agreement intended to create Asia's second largest exchange group behind Hong Kong Exchange and Clearing. SGX offered the equivalent of US$8.2 billion for the Australian Exchange.[21] However, in April of 2011 the Australian government blocked the merger and ASX withdrew its bid.

In August 2011, SGX launched its Reach trading engine in an effort to improve market quality and liquidity. It is the world's fastest trading engine and offers 10 times more capacity.[22]

On Oct. 1, 2014 SGX acquired the remaining 51 per cent stake in the operator of Singapore's national electricity market, Energy Market Co (EMC) for $23 million, giving it a platform for electricity and other energy futures contracts. SGX had already bought 49 per cent of EMC in August 2012. NEMS is the first liberalized spot electricity market in Asia. The Energy Market Authority (EMA) regulates EMC.[23] SGX began trading electricity futures in June 2015.[24]

SGX acquired the Baltic Exchange in 2016, in a deal that gave SGX access to a trading platform for the multibillion-dollar freight derivatives market. The SGX offer valued the Baltic Exchange at 87 million pounds.[25]

Resources

References

  1. SGX wins industry endorsement as 2013 “Clearing House of the Year” and for “Most Innovative New Contract Launch”. SGX.
  2. SGX unveils Catalist. Moneycontrol.com.
  3. SGX named Asia’s Exchange of the Year for the second time. SGX.
  4. Oslo Bourse and SGX sign secondary listings deal. Reuters.
  5. Singapore Exchange and GreTai Securities Market Sign Co-operation MOU. SGX.
  6. Press Release. SGX.
  7. SGX becomes first Asian firm to be designated a derivatives clearing organisation regimes. Risk.net.
  8. Singapore Exchange hires Citic exec for China derivatives push. The Financial Times.
  9. SGX Launches Asian Foreign Currency Futures. Asia ETrading.
  10. SGX Asian Index Futures Contracts Gain CFTC approval. Mondo Visione.
  11. SGX Introduces RMB FX futures. SGX News and Updates.
  12. Singapore Exchange hires Citic exec for China derivatives push. The Financial Times.
  13. Singapore Exchange to Start Bond-Trading Platform by mid-2015. Bloomberg.
  14. SGX Plans China Equity-Index Options on Futures Demand. Bloomberg.
  15. SGX launches SGX APAC ex Japan Dividend Leaders REIT Index. SGX.
  16. SGX settlement upgrade via LSE tech deal. The Financial Times.
  17. SGX’s next-generation derivatives trading and clearing platform to use Nasdaq technology. SGX.
  18. SGX establishes presence in CME Group co-location data centre in Aurora, Illinois. SGX.
  19. National Stock Exchange of India and Singapore Exchange to explore listing more India-linked products on SGX. SGX.
  20. ASEAN Exchanges Select NYSE Technologies To Build Trading Link. ECNs and Exchange News.
  21. SGX-ASX talk merger; to be 5th largest exchange group. Commodity Online.
  22. Press Release. SGX.
  23. SGX buys remaining 51% stake in electricity market operator EMC. Channel News Asia.
  24. SGX named Exchange of the Year at global Energy Risk Awards. SGX.
  25. Baltic Exchange board backs SGX bid for London firm. Reuters.