Singapore Exchange and EBS Market to build bridge between FX OTC and futures
Singapore’s SGX and EBS Market are targeting OTC business
The Singapore Exchange is to launch foreign exchange block futures on ICAP’s EBS Market, in a move the two say will bridge the FX and futures markets. The move comes as regulators around the world try to move as much trading activity towards cleared platforms as possible, as part of the ongoing G20 reform agenda.
The listed FX block futures will be available on EBS Market in early Q2 2016 pending regulatory approval. Trades will be cleared through SGX’s trade registration system Titan OTC. The initial offering will include SGX block futures in Indian rupee, Korean wan, Swiss franc, Singapore dollar and Chinese yuan. Asian spot, NDF and futures instruments will be added.
Under the deal, EBS Market gains more automation because of its connectivity to the Singapore Exchange’s Titan OTC platform, which has just launched. Built by Nasdaq, Titan OTC covers clearing and trading, and was made specifically for derivatives. Singapore Exchange’s central clearing will provide increased capital efficiency.
The two firms are capitalising on the rise of trading volumes in FX futures in Asia over the last year. For example, the USD/CNH contract has increased fourfold since inception 12 months ago to exceed USD19 billion in total notional value traded, leading SGX to claim it is the most liquid offshore RMB futures product traded across global futures exchanges.
The deal also reflects the futurisation of OTC markets, as market participants increasingly ponder whether to trade customised OTC products or vanilla futures, depending on the cost factors introduced by new rules such as Basel III which make bilateral trades more expensive by requiring more collateral to be set aside against the risk.
“I’m extremely pleased that we have signed a collaboration agreement with SGX to launch SGX listed FX block futures on EBS Market,” said Michael Spencer, group chief executive of ICAP and chairman of EBS BrokerTec. “Our partnership will allow us to develop new business opportunities and product offerings, and significantly strengthen liquidity in the FX OTC and futures markets. This is an exciting opportunity for ICAP, our customers and for the financial markets in Asia and we look forward to the launch next year.”
