SGX adds to buffet of trading products with Asian FX Futures

The SGX brand was synonymous with the stock market but this association may be ready to change.

A basket of Asian currencies

Singapore Exchange added a currency futures segment to its business last year and looks set to expand it further. Forex futures contracts for USDSGD, AUDUSD, AUDJPY, USDINR, KRWUSD and KRWJPY were launched in November 2013. Contracts for Chinese Renninbi, Japanese Yen and Thai baht will be added later this year.

SGX launches Asian foreign exchange futures

SGX’s introduction of Asian FX futures is in line with global G20 regulatory reforms where all standardised OTC derivative contracts should be traded on exchanges or electronic trading platforms, where appropriate, and cleared through central counterparties. The trading of FX derivatives on a regulated exchange platform will promote greater transparency, and better serve investment and risk management needs in the Asian time zone.

“The trading of Asian FX futures on SGX offers global investors a transparent, margin-efficient and well-regulated marketplace to seamlessly manage their Asian currency risks. We will be adding more currency pairs to our Asian FX suite over the next 12 to 18 months. This comprehensive range of Asian FX futures will contribute towards the continued growth of Singapore’s FX market, which is already the world’s third biggest FX centre,” said Magnus Böcker, CEO of SGX.

SGX sees big prospects in Asian FX futures business

“From a glass half full perspective, we see boundless opportunity,” Michael Syn, SGX’s head of derivatives said in an interview as part of a Reuters FX Summit in Singapore.

 

How will these Asian contracts be marketed?

Staying focused on Asian is a good positioning strategy because it avoids competition and there is a good shot to become leader in a niche segment.

This ad placement in the newspaper looks like SGX is setting its sights on retail forex traders. The move will surely turn up the heat for regulated brokers that have been building up the spot forex CFD market among retail traders since the mid-2000s. Many of these are foreign brands like IG, CMC and CityIndex. Retail traders are mostly speculators trading the forex majors so SGX’s Asian futures is not likely to take away market share. In addition, spot forex CFDs and forex futures have different contract specifications as well as a different proposition for trading but it is hard to see what will happen further down the road.

Newspaper cutting

Placement in the Straits Times

From a marketing angle I am curious:

  1. whether brokers that carry both spot CFDs and the new futures contracts will promote both equally
  2. how brokers will bring across the proposition offered by each product
  3. if spot forex and forex futures traders will turn out to be the same
  4. which feature of forex futures will become the key selling proposition

Definitely when there is competition among the sellers, traders will receive a better deal and ultimate the whole industry benefits from more activity.

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Soh Tiong Hum is Director of TerraSeeds Market Technician Pte Ltd. TerraSeeds is a trading educator in Singapore since 2005. Soh Tiong Hum is a member and regular speaker at Technical Analysts Society Singapore events and has a bi-monthly lunch time event at IG Singapore on forex and stock markets. He is an avid blogger on technical analysis topics; his Twitter account @sohtionghum was ranked #23 out of The Top 70 Twitter Accounts To Follow In 2015 by MahiFX. Come find Tiong Hum on Google+
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