Regional exchanges ramp up efforts to attract global clients

FIA Asia panel discussion looks at efforts by regional exchanges to attract greater international participation

4 December 2019


Leaders from several regional exchanges in Asia discussed their initiatives to attract more international clients at the FIA Asia conference on Dec. 4.

Over the past 18 months Dalian Commodity Exchange and Shanghai Futures Exchange have opened up some of their commodity futures contracts to overseas investors. Representatives from the two exchanges said they plan to "internationalize" more contracts next year and are working to accept more currencies as margin.

Li Ning, DCE's chief representative in Singapore, said more than 180 overseas institutions from 15 countries and regions have now opened accounts at DCE—a rise from 156 overseas clients from 14 countries at the end of August this year.

Over the coming months, the exchange is looking to boost international participation further and is exploring the possibility of accepting more currencies as collateral and margin deposits, he said. Presently, foreign investors can use U.S. dollars and offshore renminbi as deposits for futures accounts.

"In addition, DCE has a very well-established agriculture commodity futures market. My colleagues at home are busy with the preparations for the opening up of our agriculture commodity market and hopefully this time next year we will be able to offer more products and services [to overseas investors], including palm oil and one of our soybean complex," Li said.

Lawrence Zhang, SHFE's chief representative in Singapore, highlighted the exchange's decision to set up a separate subsidiary, the Shanghai International Energy Exchange, specifically to attract international brokers and traders. He said international investors account for around 15% of trading volume and 25% of open interest in crude oil and TSR 20 rubber futures, the two contracts that it has listed on INE.

"To attract more international investors there are many things that we need to do. For instance, we are going to set up a warehouse in Singapore so investors who trade in China can make a physical delivery there, which will be more convenient for them, and we will do more opening up—this is a trend that won't stop," Zhang said.

Additional products that will be made available to international investors will include fuel oil with a new standard contract, Zhang said, with copper futures planned further down the line.

Representatives from exchanges in Thailand, Malaysia and Korea also discussed the initiatives they have in place to encourage overseas investors to participate in their markets. Bursa Malaysia Derivatives, for example, has a partnership with CME Group, which distributes the Malaysian exchange's contracts through the CME Globex electronic trading platform.

"As long as you can trade into CME's products you can trade into some of Bursa Malaysia's derivatives products," Samuel Ho, Bursa Malaysia Derivatives' chief executive, said. "This message has been lost along the way, however, and we will work hard to keep this ongoing."

Rinjai Chakornpipat, managing director, Thailand Futures Exchange, said the exchange has upgraded its infrastructure to accommodate foreign investors and is building a new data center for co-location. It also plans to extend the trading hours of some of its major products.

"One of our key products is gold futures," Chakornpipat said. "We don't have the same trading hours as other exchanges, so in the first quarter of next year we will extend the trading hours of the gold futures to 3 a.m., which will coincide with trading in the U.S. We are also exploring other products to trade at night."

John Donghoon Shin, chief representative, Singapore branch at Korea Exchange, said that with local population growth slowing down and many domestic investors looking to trade overseas products, there is a need to promote its market to foreign investors. The exchange's recent initiatives include the listing of its KOSPI 200 futures and options on CME and Eurex during the overnight session in Korea and upgrading its infrastructure to support direct market access for customers in the region and globally, Shin said.

The National Stock Exchange of India, one of the world's top exchanges in terms of numbers of contracts traded, was also represented on the panel. K. Hari, NSE's chief business officer, pointed to the new international exchange it has set up in Gujarat International Finance Tech City (Gift City) - International Financial Service Center (IFSC) as an example of the exchange attracting foreign investors.

"We have introduced new products there in line with global benchmarks that we have in the onshore market in Mumbai. We are also working with Singapore Exchange to get the Nifty contracts in the IFSC. Work is in progress and both sets of regulators in principle have given us the nod to take this initiative forward," Hari said.

The project will bring trading of the SGX’s Nifty futures contract, which is based on the NSE’s flagship Nifty 50 index, to the new centre. The exchanges hope the project, which is slated to be operational before the end of 2020, will create a larger pool of liquidity for this contract as well as boost activity at Gift City. The Indian government has been trying to lure foreign investors to Gift City, which is "absolutely tax efficient, has no stamp duties, no income taxes and offers dollar contracts", Hari said.

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