Much like its Western counterpart, the Asian derivatives industry spent the last year navigating an ever-changing environment dominated by the pandemic and the emergence of new market trends in retail investment, cryptocurrencies and ESG.
In a discussion on the outlook for Asia-Pacific exchanges on Day One of the FIA’s Asia-V conference, panel participants reported no slowdowns in opportunities despite a host of challenges faced by exchange-traded markets in 2021.
“China is making its markets more accessible,” said Mezhgan Qabool, Eurex’s head of market development and sales, APAC and the Middle East. In response to that more receptive environment, she noted that Eurex launched MSCI China Hong Kong Listed Large Cap and MSCI Hong Kong Listed Large Cap derivatives, as well as futures on the MSCI China index, this year.
And as the topic of climate change increasingly caught the world’s attention in 2021, ESG became a much more important topic, said Qabool. Eurex has long been a dominant player in the global ESG derivatives markets.
On a similar note, Christopher Fix, managing director and head of Asia Pacific at CME Group, noted his exchange is working on enhanced delivery for its agricultural products, as well as on sustainable clearing. “And given the expansive growth of exchange-traded funds around the ESG sector, we are trying to work with ETF investors to show them how they can lay off their risks,” he added.
The derivatives industry forms the backbone of the regulated market, Fix said. In 2018 CME Group had eight educators in Asia, “and now we have 40,” he said.
Concerns about so-called “greenwashing” have grown along with investor interest in ESG products, said Jennifer Ilkiw, head of Asia Pacific at the Intercontinental Exchange.
“We’re launching nature-based contracts around this,” she said, adding that she expects markets to be volatile, “as we have less and less carbon demand and energy usage increases.”
Moderator Sharon Shi, a managing director at G.H. Financials, pointed out that ICE has not pulled back from energy products. In March 2021, ICE Futures Abu Dhabi, or IFAD, launched trading in ICE Murban Crude Oil Futures and 18 Murban-related cash settled derivatives and inter-commodity spreads
ICE anticipates a tremendous amount of volatility in the energy markets going forward, “and for us, volatility is good,” Ilkiw said.
Commenting on the emergence of Asian retail investors, Ravi Varanasi, group president of the National Stock Exchange of India, estimated retail investment has gone up 20%. “International markets have traditionally been institutional,” Varanasi said, “Now we need to get products that make sense to retail investors.“
“The pandemic has changed the characteristics of the market,” and a younger generation is beginning to participate, noted Denise Huang, senior vice president, Taiwan Futures Exchange. “We have to be patient.”