SGX Execs See Return to Macro Trades; COVID-Led Push Toward Digitalization

Suzanne Cosgrove

Suzanne Cosgrove

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In a press briefing, Singapore Exchange Limited (SGX) CEO Loh Boon Chye Thursday said the pandemic has created both challenges and extreme market moves, and the resulting economic damages are just now beginning to unfold.

However, since Asia was pushed into the COVID cycle earlier than other regions, Loh said Asia is expected to recover from the COVID fallout more quickly. 

Some pre-COVID-19 trends accelerated as the virus continued, Loh said. For example, while interest rates were low to start, the more fragile post-COVID economy clearly ensures they will remain low for some time.

In turn, the trend toward passive investing has increased amid the low-rate environment because “no one wants to pay fees” under current conditions, Loh said. The push toward macro trading, evident in the 1990s, also has returned in the wake of COVID.

By definition, a macro strategy looks at investments based on the overall economic and political views of countries and can include long and short positions in equities, fixed income, currencies, commodities and futures markets. The Singapore Exchange Limited (SGX) offers a full suite of contracts to trade all of these, Loh noted. SGX also recently announced its acquisition of the cloud-based BidFX, a front-end trading platform for currencies, to expand its FX offerings.

Loh highlighted commodities as an example of an asset class that has gained more attention and serves as a macro proxy as current trends unfold, adding that screen trading of commodities has increased since the start of the pandemic, with some migration of trading seen on-screen from over-the-counter trading. 

The “financialization” of SGX iron ore derivatives also has taken off, said Beng Hong Lee, head of SGX’s FICC (fixed income, currencies and commodities) business.

The current economic climate has caused supply changes in iron ore that led to a big price rise, and the commodity could become an important indicator for metals, he said.

Also at the press briefing, Michael Syn, SGX senior managing director and head of equities, said in addition to working closely with Singapore regulators and local police to assure compliance with COVID-related rules, the exchange “had to be alert to what happened in the trading world.” 

Because of SGX’s long hours and physical location – its market hours extend from the time Australia opens to the New York close – the exchange was in a unique position to see early supply chain disruptions in commodities like oil and rubber during the first days of COVID, just after the Chinese New Year and Japan’s Golden Week, Syn said.  

In addition, “most of our members are not from Singapore,” Syn noted, so SGX had to make AGMs (annual general meetings) virtual. Increasingly, Syn said, SGX is working toward digitalization of services for investors, making sure to give them real-time updates through APIs.

“We’re moving forward toward execution performance optimization,” added Loh.

“Who ran the digitalization strategy in 2020? It was COVID,” Syn joked. Investors who were not used to using software from home, and were more accustomed to talking to their brokers in person over a beer, were forced to convert because of virus-related barriers, he said.

 

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