Singapore Exchange (SGX) has told FO Week that it
aims to build on its role as a provider of Asian equity
products with the relaunch of an Indian index product in the
second half of this year, and a Chinese product at a later
date.The contract will be based on S&P's CNX Nifty Index
contract, which tracks India's top 50 stocks, and reflects
SGX's focus on developing a pan Asian suite of equity index
contracts on its new electronic trading platform.
"Equity derivatives is the Asian story," said ceo Hsieh Fu Hua,
adding that SGX wants to be "the exchange of choice for
exposure to the region." Hsieh said the development of domestic
liquidity pools in local markets was good for SGX. He cited the
growth of the market in Taiwan as an example of the benefit
feeding back to the exchange. SGX's MSCI Taiwan Index future is
now the second largest contract in volume terms on the
exchange, after the Nikkei 225.
Market participants were cautiously optimistic about SGX's
plans. Sunny Arora, co-founder of Jaypee Capital in Mumbai,
told FO Week, "SGX going electronic would certainly
help as participants would be able to arbitrage between
in India and Singapore.
However, India is opening up its markets very rapidly and more
funds are looking to access India directly."JP Morgan's global
head of futures and options, Richard Berliand, recently told FO
Week he believed that "an international exchange can only list
someone else's [domestic] product successfully as long as the
home market is inefficient."
However, one regional futures head said, "the relaunch of the
SGX India contract has a good chance of success since foreign
investors now have substantial investment, compared to previous
years, into the Indian equity markets and will find
accessibility easier in using SGX."
SGX first listed the Nifty in September 2000 using its previous
electronic trading platform, but the contract failed due to
insufficient global interest in India at the time.
However, sources at SGX say a market makers programme similar
to its existing e-Nikkei contract will be introduced this time
to support the contract.
The exchange planned to continue pursuing its strategy of
moving to full electronic trading following the success of the
side-by-side trading offered on the Nikkei contract (see FO
Week Vol 10 No 5). Market share in the contract has grown
since the switch the screen trading, it claims.
"We are closing the floor because the switch has gone so
quickly," said Hsieh. "The end of the floor is here." SGX
announced the simultaneous launch of electronic trading and the
closure of the floor for the Taiwan index future earlier this
The move will come at the end of June. The exchange is eager to
encourage continued participation from Locals, who account for
30% of volume, and arcades as it proceeds with the closure of
the floor. Since last year, it has embarked on initiatives to
prepare Locals for electronic trading, including the provision
of trading booths and handheld devices, free trading strategy
courses and simulated trading for the Electronic Learning
SGX has also launched an incentive scheme in tandem with the
Singapore government to attract proprietary trading firms to
the country. The scheme aims to help firms reduce their setup
costs by funding up to 50% of the costs, capped at S$250,000
($153,000) per firm, and has attracted interest from
international houses (see FO Week Vol 10 No 8). Hsieh
insisted that the shift in Eurodollar volume, following Chicago
Mercantile Exchange's initiatives last year, which led to the
demise of the SGX listed product, has not impacted his
exchange's revenues nor its share price.
While trading volume has dropped, from more than one million
contracts a month last summer to around 12,000 in February, the
mutual offset system operating between the two exchanges is
"still very much alive," Hsieh said. Clients maintain huge open
positions on SGX, he added, despite trading on Globex.
Meanwhile, SGX continues to explore the energy market for
expansion opportunities. Discussions with New York Mercantile
Exchange (Nymex) are ongoing, said Hsieh, despite Nymex's
decision not to use SGX's floor for an Asian market base. "Our
preference is to do a joint venture with an existing market but
if it proves impossible, we would go it alone," Hsieh said.
Singapore remains an important physical and paper energy
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