Singapore aims to become e-FX hub for Asia, says MAS’s Loh

Singapore is bidding to attract more foreign exchange players in an effort to become the largest electronic price discovery hub in Asia, Jacqueline Loh, deputy managing director of the Monetary Authority of Singapore (MAS), told delegates at the 14th annual FX Week Asia conference.

Singapore is currently the third-largest forex trading centre in the world, after London and New York, and its share of trading volumes is growing. But while Asia saw its slice of global forex volumes inch higher to 7.9% in 2016, from 5.7% in 2013, it lags behind other regions in the rapid electronification of currency trading.

Global forex players also tend to co-locate their matching engines in Tokyo, rather than Singapore, when expanding their network of electronic-trading infrastructures from London and New York.

“As Asia’s forex trading needs grow and as electronification of Asian forex trading progresses, there is a need for a more efficient price discovery venue where [the] pricing and matching of forex trades [can] take place,” Loh told delegates on August 29.

“We aim for Singapore to be the e-trading ecosystem in the region. We are encouraging and working with key forex players and platforms to anchor their e-trading facilities, matching and pricing engines in Singapore,” she added.

London-based non-bank market-maker XTX Markets became the first liquidity provider to set up a matching engine in Singapore, in partnership with MAS, in May.

MAS has received good interest from a strong pipeline of players – global Tier 1 banks, non-banks and platforms – looking to set up their trading engines in Singapore

Jacqueline Loh, Monetary Authority of Singapore

“To date, MAS has received good interest from a strong pipeline of players – global Tier 1 banks, non-banks and platforms – looking to set up their trading engines in Singapore. XTX Markets and our own home-grown Spark Systems are good examples of the first movers as a start. We will see more in time to come,” she said.

The aim of attracting more co-location is to reduce latency, which would lead to better pricing and execution quality, as well as improved fill ratios for clients, as liquidity providers’ need for using last look diminishes.

Singapore’s ambitions to become a global forex pricing and liquidity centre by 2020 were first outlined in the Industry Transformation Maps (ITMs), as the authority called them, in 2017.

In April 2016, the average daily trading volume on Singapore’s foreign exchange market was $517 billion – 35% higher than the $383 billion recorded in 2013. This growth was mainly driven by forex volatility and the surge of trading in renminbi, South Korean won, sterling and yen, the survey showed.

Singapore surpassed Tokyo to become the world’s third-largest forex market in 2013.

Global financial centre by 2020

In October 2017, the MAS rolled out ITM initiatives with the aim of bolstering Singapore’s status as a leading global financial centre in Asia in 2020.

Other than an e-trading hub for forex, the initiative outlined Singapore’s aim to become a leading international wealth management hub, and an Asian hub for fund management and domiciliation.

The initiative also came with a growth target. The MAS expects the financial services sector to grow by 4.3% a year over the medium term – nearly twice as fast as the overall economy. More than half, or 2.4%, of the growth will be driven by productivity.

One year after the Code

Loh, who also chairs the Bank for International Settlement’s markets committee, said Singapore will continue to take a leading role in promoting adoption of the principles-based Foreign Exchange Global Code of Conduct, which was released on May 25, 2017.

“We have recently collaborated with the Association of Banks in Singapore to encourage all banks with forex operations in Singapore to issue statements [of commitment] by the end of this year,” she told the conference.

All 18 members of the Singapore Foreign Exchange Market Committee (SFEMC), which covers the sell and buy side, issued statements of commitment to the Code, said Loh. A significant number of banks operating in Singapore have registered their statements on a public register on their websites.

Loh said the SFEMC will be launching a public register in Singapore in the second half of this year, on which market participants will be able to post their statements.

“SFEMC believes that having such a public register in Singapore would help in our promotion efforts in getting more market participants, particularly buy-side entities, to issue statements [of commitment] to the Code,” said Loh. “Where your firm has issued a statement, we welcome you to publish your statement on the SFEMC public register when this is ready.”