When exchanges look at growth areas, Asia gets top ranking. The Singapore Exchange, which has positioned itself as the Asian gateway for international traders over the past 30 years, now sees great potential in the decades ahead.
Muthukrishnan Ramaswami, president of SGX spoke with John Lothian News editor-in-chief Jim Kharouf at the FIA Boca conference, and said the exchange is ready to expand geographically through technology upgrades and by asset class as well, especially in FX and commodities.
SGX’s derivatives exchange posted record volume of 120.3 million contracts in 2014, up 7.4 percent from a year earlier, according to the FIA Volume Survey. The momentum has continued into 2015, with the exchange posting a net profit in Q2 of US$75 million on revenues of US$164.6 million, a 19 percent jump from a year earlier.
Volumes in its FTSE A50 futures contract increased 183 percent in Q2, to a record 17.4 million contracts, while its Nifty futures, SGX Nikkei 225, MSCI Taiwan, MSCI Indonesia contracts also continue to lead in marketshare. Commodities also have taken root at SGX, particularly in iron ore futures, which posted 1.2 million contracts traded in Q2, a fivefold increase from a year earlier.
“It’s been a year of stabilizing into the new environment and a year of significant growth on the futures for us,” Ramaswami said.
He said the exchange, which opened in 1984 in interest rate futures with its eurodollar futures mutual offset system with the Chicago Mercantile Exchange, moved onto equity indexes. In recent years, it’s tried to expand that financial futures menu with FX futures.
“What we’ve done in the last couple of years is, we’ve added the FX suite that goes with that,”
he said. “Our current growth is really FX focused with a contract that supports pretty much all the equity derivatives we have.”
In terms of technology, Ramaswami said the exchange is continuing to invest in its trading and clearing platform. The exchange has been focused on expanding its global presence, with an eye toward opening a US office, in addition to its other offices in Hong Kong, Tokyo, Mumbai and London.
In the meantime, Ramaswami said that the exchange is upgrading to the latest version of the Nasdaq OMX system, which will enable a 24-hour trading day for SGX. It also is working on a new fixed income platform. And he added that the exchange is also developing a front-end solution as well, which could be rolled out in the next couple years.
Going forward, Ramaswami said the exchange is well positioned in the region as well as with its mix of financial and commodity futures. The exchange has posted compounded growth of 25- to 30 percent over the last four to five years. It also must fill the shoes of its outgoing CEO, Magnus Bocker, who is departing in June.
“On the futures end of our business, we’ve continued to see steady and strong growth over time,” he said. “I think that is a reflection of the need for risk mitigation instruments in the Asian context, which wasn’t well developed. It will continue to develop. We are in the early stages of that. So you will see the use of hedging instruments growing in Asia.”