SGX adds equity indices; readies Q3 FX futures launch

The Singapore Stock Exchange (SGX) has licensed 14 new MSCI regional and country equity indices in a move to expand the coverage of index derivatives to Thailand, the Philippines and other Asian markets.

SGX head of derivatives, Michael Syn, told SRP that the launch of these new indices will benefit the issuance of exchange-listed warrants and structured products in Singapore.

"The new equity index derivatives serve as an efficient hedging and access tool for issuers of over-the-counter or exchange-listed structured products," he said. "Their availability for trading on SGX is intended to offer extended hours of on-screen and block liquidity - in other words, availability outside of onshore cash market hours. This facilitates greater reliability in derivative replication and improved risk management, leading to enhanced liquidity and pricing for customers."

SGX has now licensed a total of 19 MSCI indices, encompassing almost all of Asia's key capital and other growth markets. The 14 new indices are components of broader regional indices such as the MSCI Emerging Markets Index - covering Thailand, the Philippines and other country markets - and the MSCI Frontier Markets Index.

The expanded suite of SGX products based on MSCI indices will provide global investors with a broader reach into Asian emerging markets, and complements SGX's existing equity derivatives suite such as SGX MSCI Singapore, SGX MSCI Taiwan, SGX Nikkei 225 (Japan), SGX FTSE China A50 and SGX CNX Nifty (India).  As the Asian gateway, SGX will provide investors with single-country access to about 90% of the MSCI AC Asia Index by market capitalisation.

"With these new equity derivatives being traded and cleared on the exchange, it will also bring about greater price transparency and reduced counterparty risk," said Syn.

In addition, SGX is awaiting regulatory approval to launch a new suite of Asian foreign exchange (FX) futures in Q3 this year. The proposed FX derivatives will initially include four currency pairs: AUD/USD, AUD/JPY, INR/USD and USD/SGD.

The introduction of FX futures for trading and clearing, said Syn, is SGX's response to strong client demand for currency management tools to complement its suite of Asian equity derivatives.

SGX is the world's largest offshore market for Asian equity derivatives with a record US$5tr notional of contracts traded in 2012. SGX also clears non-deliverable FX forwards in seven Asian currencies.