Best FX exchange – Singapore Exchange

SGX’s strength in depth, liquidity and efficient access across currencies secures the Best FX exchange award for 2021

Deep liquidity across a comprehensive range of FX products has been at the core of the Singapore Exchange’s (SGX’s) growth into the fastest-growing FX exchange in Asia since it introduced FX futures contracts in 2013. “We intentionally pivoted towards Asian currency futures because we saw the advent of electronic trading for non-deliverable FX forwards happening in a number of key markets, including those of China, Hong Kong, India, the Republic of Korea, Taiwan, and so on, and we see the trend for trading Asian currencies developing in the same way as it has for the G10 currencies,” says KC Lam, head of FX and rates at SGX in Singapore. 

A cornerstone of this growth has been SGX’s FX product offerings for the trading of offshore CNH and INR, with the former having seen SGX become the largest international CNH futures market that supports China’s ongoing push to internationalise its currency. Not long after its launch in 2014, the SGX’s USD/CNH futures gained leadership position in market share and, for the last three years, has enjoyed more than 80% of the global market, underpinned by liquidity growth at an average daily volume in the first quarter of 2021 of approximately USD4.4 billion. SGX’s growth in the INR futures market has been on a similar scale despite being a relatively late entrant to the market in 2013, and it is currently the number one offshore exchange for INR futures, with a greater than 70% share of the global market. 

As an exchange, SGX also provides deep liquidity across the full spectrum of Asian FX futures contracts, and this continues to expand to include offering both mini and full-sized futures across various currencies, allowing for different types of clients to meet their individual trading and hedging needs. Launched relatively recently, for example, SGX’s TWD/USD and KWD/USD futures have become the most liquid offshore contracts. Specifically, in 2020, the total traded notional value of SGX’s TWD/USD futures reached USD701 million, up 391% year-on-year. In the meantime, with more than USD150 million per day in notional value traded so far in 2021, SGX’s USD/SGD futures contracts are the most liquid SGD futures contracts available in the market. Also in 2020, SGX launched a suite of full-sized futures in multiple currency pairs, including KRW/USD, USD/SGD and USD/INR options, plus mini-USD/CNH futures to allow investors more ways to express their market views and gain better leverage. 

“Our offering to international clients is further enhanced by our ability to offer market participants a robust FX market exchange that has deep liquidity across Asian, European and US trading hours – nearly 23 hours of continuous trading on the SGX – so they can optimally manage their risks and express their views on the market whenever the need arises,” says Lam. “Even during the unprecedented and uncertain times of the Covid-19 pandemic in 2020, SGX provided international market participants a venue to manage their Asian currency exposure around the clock, with continuous price formation with good sizes,” he adds. “We continue to provide the longest derivatives trading hours in the Asia region, providing consistent, transparent price formation with over 95% of FX futures volume traded electronically.” 

Indeed, the robustness of SGX’s exchange offering was evidenced throughout the height of the pandemic by the fact that, at the peak of market volatility and throughout the year as markets buckled under pressure, SGX’s market volumes and liquidity soared, with participants gravitating to the exchange to manage risks. In fact, SGX’s aggregate FX futures volumes jumped by 58% year on year, to three million contracts or USD171.5 billion (up 72% year on year), its highest level ever, as INR and CNH contracts saw traders significantly increase their hedging activities to protect their assets. In the meantime, aggregate FX futures volume surpassed USD1.4 trillion in 2020 (8.6% higher year on year), with more than 25.5 million contracts changing hands. Aggregate open interest for all SGX FX futures was USD10.1 billion at the end of the year, an increase of 27.8% year on year on a USD notional basis. 

Having built a successful FX futures business, SGX is now expanding its reach beyond futures and into the OTC space, which has a lion’s share of the global FX market. SGX’s ambition is to build Asia’s largest integrated FX platform for international FX OTC and futures market participants. The first step in this direction was allowing for the bridging of over-the-counter (OTC) and listed markets, with the first of its kind FlexC FX Futures product, enabling clients the flexibility of OTC FX with the capital efficiencies and surety of centrally cleared futures. Building on this Flex C concept, and specifically geared towards further enhancing its capabilities as an exchange, SGX invested in – and acquired in 2020 – leading cloud-based FX trading platform BidFX, which enables the trading of Asian FX futures alongside the OTC products offered on BidFX’s platform, bringing together both pools of liquidity. This capability was augmented in July 2021 with the acquisition by SGX of the single-source and direct-to-market FX trading platform MaxxTrader. 

Since its incorporation in 2008, MaxxTrader has been a leading provider of FX pricing and risk solutions for sell-side institutions, including banks and broker/dealers, as well as a multidealer platform for hedge funds. Its average daily trading volume has also grown in that time to over USD17 billion, based around a strong global client and dealer franchise with more than 100 global banks, regional banks, broker/dealers and hedge funds currently connected to its platform. “The buy-side clientele of BidFX will be well complemented by MaxxTrader’s strong sell-side and broker client base and, together with SGX-listed FX futures, these acquisitions form part of SGX’s multi-phase strategy to build an integrated Asian FX marketplace for global investors,” concludes Lam. 

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