Singapore underlines status as Asia's FX hub

By Russell Toop, Cheshire Consultancy

Published 10 February 2020

As global trading volumes increased 30% to $6.6 trillion (£5 trillion) in the three years to the middle of 2019, so the increase in FX trading in Singapore was broad based, with growth across the G10 currencies. The US dollar, yen, euro, and the Australian and Singapore dollars were the most-traded currencies in the island state

Trade volume in Asia is still highest for spot (46.6%), but forwards and particularly non-deliverable funds (NDFs) are becoming more popular, in line with global trends. Emerging market currencies, particularly in Asia, have grown considerably.

Regulator MAS is aiming for Singapore to be the e-trading ecosystem in the region. They are working on this strategic initiative by encouraging and working with key FX players and platforms to anchor their e-trading facilities, matching and pricing engines in Singapore.

As a major FX centre globally, MAS is keen to develop Singapore's FX market to serve the growing trading and hedging needs in the region. To this end, MAS is working with market participants such as banks and trading platforms to build up Singapore's e-trading infrastructure.

The goal for participants will be enhanced price discovery, liquidity and transparency in the Asian time zone for FX and over-the-counter derivatives trading.

Family offices are a focus for Singapore’s central bank. The wealth accumulation and need to transfer wealth from one generation to another is driving growth and demand for access to FX markets. The number of Asian billionaires is expected to rise by 27% to over one thousand by 2023 making up more than a third of the world’s total billionaire population.

An increased number of buy-side clients, fixed income teams, corporate treasury operations (there are more than 5,000 corporates) and a growing community of non-bank proprietary trading firms in Singapore are all looking for better connectivity & e-trading solutions.

To enhance price discovery, liquidity and transparency in the Asian time zone, you need to attract speed-sensitive traders, some of whom currently send orders offshore. It takes about two milliseconds to match an order in Singapore, versus 200 milliseconds to route it to New York or London. With the rise of low-latency connectivity and co-location solutions, business friendly, disaster-free and cost-efficient Singapore has seen an increase of Liquidity Providers making Singapore their eFX hub.

Spark Systems, a new entrant to the market, has big ambitions to bring more of the world's currency transactions to Asia. The Singapore-based upstart trading venue for foreign exchange is looking to leverage the latest in technology to improve the user experience in trading and execution by providing a stable and ultra-low latency marketplace, which includes an aggregator and algorithms for execution.

In a market long dominated by major Western financial firms, Spark aims to differentiate itself by charging lower fees than competitors. Its goal is to create a venue for Asia-based institutional investors to trade with each other in Singapore, instead of routing orders to London or New York.

Citigroup, Standard Chartered Bank, BNP Paribas, JP Morgan, UBS, Jump Trading, Euronext and XTX Markets are already established or are making moves to build out FX pricing and trading engines to be able to offer follow-the-sun execution in FX. These efforts will help fill the historical gap in e-trading in the Asian time zone which has seen poor execution and high rejection rates during volatile periods.

Listed derivatives have also benefitted substantially from the investments by Singapore Exchange (SGX) in platform and product innovation.

In 2019, total trading volume in SGX USD/CNH Futures hit $907 billion, up 70% on 2018. Year-end open interest grew 76% year-on-year to $5.3 billion (this represents close to 68% of the total outstanding positions across all exchanges with similar offerings).

One of Singapore’s advantages is its location in the centre of South-east Asia, one of the world’s fastest-growing regions where rising international trade has driven the need for more sophisticated FX instruments and facilities. Nestled among several emerging markets, trading orders can be executed quickly in Singapore, the region’s financial and commodity trading hub.

SGX has grown to become Asia’s largest and most diverse FX exchange. Since starting its FX business about six years ago, it has achieved market share leadership in the two most important Asian currency pairs – offshore RMB and INR futures.

As Asia’s most internationally connected and trusted market infrastructure, the exchange has been advocating the use of the RMB while supporting Singapore’s position as a leading global RMB centre. It was among the first exchanges to accept RMB cash collateral as margin collateral, while the Chinese currency can also be used for all open positions maintained on the SGX Derivatives Clearing platform.

For institutional investors, SGX has emerged as a natural venue of choice to manage risk through USD/CNH and INR/USD futures. When SGX first launched FX futures, it focused on Emerging Asia currencies to enable global investors to manage risk and access opportunities in the region’s powerhouse economies.

Currently, the exchange lists 19 currency pairs and is calibrating its offering to market demand. The FX product that has tracked the fastest growth is the SGX USD/CNH futures contract, which anchors the exchange’s FX franchise.

Significantly, SGX USD/CNH Futures offer value for internationalising Chinese firms seeking risk-management solutions. The contract can be an extension of the product suite for Chinese brokers that are branching offshore. BOC Singapore and ICBC Singapore are among the market-makers, while SGX is also collaborating with BOC International on RMB initiatives.

Market forces led to an explosion in the number of venues, from fewer than 10 a few years ago to more than 70 today, making price discovery even more difficult and spreading total liquidity out over a multitude of platforms.

However, there has been consolidation with Deutsche Boerse purchasing 360T and CME buying EBS in late 2018. Further M&A activity is likely in 2020 with recent news suggesting that State Street’s Currenex, which is the fourth largest multi-dealer platform, potentially on the market, with Deutsche Boerse and Euronext both in the frame as potential suitors. The largest by market share is Refinitiv on 33%, FX Connect at 28% and Bloomberg's 10%.

The FX market in Asia has certainly transformed in recent years. Regulatory developments and market structure adaptations, automation and digitisation as well as client-led demand for the ability to demonstrate best execution to clients this is the driving force behind technology adoption for aggregation, algorithmic execution strategies along with transaction cost analysis.

About Cheshire Consultancy

Cheshire Consultancy based in Singapore helps financial market technology companies expand in the region by advising on building and driving their business development strategies. For an independent confidential discussion please contact:, call +65 91858781 or visit