Derivatives Exchange of the Year: SGX

For SGX the past 12 months have all been about market access and connectivity, with the exchange leveraging its strong Asian network to bring markets together. This is something that customers have clearly appreciated.

The most obvious example was a new cross-border derivatives trading link between SGX and the National Stock Exchange (NSE) from India. Although this service only launched at the end of July, it had taken many months to set things up.

The NSE and SGX had a bit of a rocky relationship, and in 2016 the Singapore stock exchange sued its Indian counterpart after, in a bid to bring more liquidity ashore, NSE stopped allowing its indices overseas.

The latest merger marks a maturation of the relationship between the two exchanges and underlines the strength of SGXAsian network of to concretize such important partnerships.

“It’s just another proof of concept than two exchanges with very strong networks – NSE with its national offer and SGX with its global footprint – can combine in very different ways to collectively bring additional liquidity to clients to grow contracts and improve market access,” said Beng Hong Lee, Head of Fixed Income, currencies and commodities at SGX.

He adds that this will benefit the entire financial ecosystem.

“Global clients who use us today as their gateway to Asia can now enter India without having to set up a separate account with onshore brokers,” says Lee. “From the Indian perspective, they will have a gateway where global users of this contract can access their infrastructure through SGX in an easier way. It’s a win-win for both sides. »

Global clients who use us today as their gateway to Asia can now enter India without having to set up a separate account with onshore brokers

Ben Hong Lee, SGX

The benefit for customers is clear.

Greg Kallinikos, Managing Director for Asia at StoneX Group, a global brokerage firm, said: “Through Connect, StoneX is able to continue to provide seamless access to Nifty derivatives contracts, now listed on NSEas participants continue to face SGX as a central counterparty and benefit from its recognized global standards for risk management and clearing. This arrangement also allows our clients to continue the efficient management of their portfolio, using other SGX some products.”

SGX also continued its efforts with other partnerships this year. Another noteworthy agreement is an agreement with the New Zealand Stock Exchange (NZX) to list the country’s top dairy derivatives contracts in Singapore.

Lee describes this arrangement as unique in that, rather than listing contracts on both exchanges, NZX agreed to migrate all customers to SGX, including open interest. Contracts began to be negotiated on SGX early December 2021.

“This is a very exciting collaboration because it goes beyond the traditional type of partnership agreement, where we develop and nurture new indices and bring ecosystems together, to a where, perhaps for the first time , two exchanges to increase liquidity on a single platform via combining product expertise and client connectivity,” says Lee.

New Zealand remains the largest exporter of dairy products in the world, and the establishment of contracts SGXThe platform makes sense in terms of promoting the internationalization of the industry.

Since migrating the contracts, open interest for them has more than doubled, from just over 60,000 lots to over 127,000 lots, as of August 15. At the same time, the average volume of derivatives fell from 1,157 in the first half of last year to 1,677 lots. for the same period this year.

Lee says this type of arrangement could be used as a model for other national contracts where there is only fairly limited international participation.

China Partnership

SGX also claims to be making great strides in terms of partnership deals in China, which Lee says is a key priority when it comes to providing market access in Asia.

Although Lee isn’t able to say too much about the partnerships that have been struck in the country this year, largely due to strict non-disclosure agreements (ness) attached to them, the one that excites him the most is the deepening of relations with the Central Depository of China & Clearing Company (CCDC).

Although the memorandum of understanding with CCDC was originally signed in 2020, Lee says the two partners are now working together to further digitize and streamline China’s onshore primary market infrastructure.

“There is a lot of room to improve the efficiency of institutional investors and underwriters in the primary bond market,” says Lee.

He adds that this feeds into the strategic approach that SGX took to establish a fully multi-asset, multi-format platform.

CCDC is the largest custodian in the country, and there are many ways to work with them around data, [Sense?]settlement and clearing in order to facilitate the whole internationalization of the RMB“, explains Lee.

Unlike in Hong Kong, where the Hong Kong Monetary Authority owns the custodian, SGX – rather than the regulator – owns the depositary in Singapore.

SGX now plans to roll out more electronic workflow automation solutions to the market.

“Beyond being a traditional exchange service provider, we are expanding into services that have deeper engagement and interaction with customers through technology, workflow and data,” says Lee. . “It’s a journey, and hopefully we can share more good news as we execute on this plan.”

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