During an unprecedented year marked by a global pandemic and shifts in regulatory, economic and political environments, exchanges in Asia Pacific have been working to launch innovative products and improve their processes, a panel of exchange leaders said at FIA's Asia Derivatives Conference on 1 December.
Singapore Exchange, for example, will be launching a steel rebar futures contract denominated in RMB in the coming months, Michael Syn, senior managing director and head of equities at SGX, said on the panel. The contract, which the exchange has been developing for the past two years, will help investors gain exposure to market activity in China, the world’s top steel producer and consumer.
"We think this will be huge. It is already very liquid on the Shanghai Futures Exchange and this interchange of price formation has to happen in more places because the RMB can only be internationalized if it's everywhere, and it's certainly spreading," he said.
SGX’s move comes as China continues to open up its global commodity futures markets to international investors in a bid to boost its influence on pricing and raise the profile and influence of its currency. Last month, the Shanghai International Energy Exchange, a subsidiary of the Shanghai Futures Exchange, made bonded copper futures available directly to overseas investors.
"Right now, we have four products open to international investors, including copper, purified terephthalic acid, low-sulphur fuel oil and of course crude oil," said Lawrence Zhang, chief representative, Singapore office, Shanghai Futures Exchange.
The move to internationalise existing commodity futures or launch new ones is part of China's goal to strengthen its pricing power in the commodities markets. In copper, for example, China accounts for more than half the world’s consumption of the metal, which is used in everything from electronics to construction.
Zhang described the copper futures launch on INE as "a milestone for the Chinese futures markets". He added that SHFE plans to introduce several new contracts in the domestic market over the next year, including options on crude oil and freight as well as futures on liquefied natural gas, gasoline and diesel.
Denise Huang, senior vice president at the Taiwan Futures Exchange, talked about the exchange's focus on environmental, social and governance products. On 8 June, TAIFEX launched a new equity index futures contract based on the FTSE4Good TIP Taiwan ESG index, which has been designated as a benchmark for the discretionary investment plan of Taiwan’s Labor Pension Fund.
"Our ESG market has been very active and supported by the government," Huang said.
Helen Lofthouse, executive general manager, derivatives and OTC markets at the Australian Securities Exchange, talked about the exchange's launch on 30 November of a new 5 Year Treasury Bond Future, which she said bridges the gap between the 3 and 10 Year Bond Futures by providing an additional point on the curve.
"It's great to see so many customers right in there at the beginning trading that contract. It was obviously something that was needed," she said.
APAC derivatives exchanges also are enhancing their technology. For example, the Japan Exchange Group is working on upgrading its trading platforms.
"In Q3 next year we are going to move to a new trading platform," said Matthias Rietig, senior officer and chief representative in Singapore for JPX. "Our commodity business is also something that is new to us. We had this migration of the Tokyo Commodity Exchange as well as migrating a clearinghouse during the pandemic. There need to be some touch ups, so these kinds of things will certainly be on top of the list."
Kevin Rideout, managing director, global client development at Hong Kong Exchanges and Clearing, said the exchange is also focusing on platform development.
"We are firing on all cylinders and really igniting two ecosystems, one being the client base, the geography that we enjoy here in Hong Kong, where the East meets the West, particularly mainland China meeting with the Western client base. The second is linking up the cash market to futures and the options and marrying up with the ETFs and structured products."
A recording of the webinar is available to registered attendees. For a full list of FIA's Asia-V conference programming, visit: FIA.org/asia