Gone Global: OTC Strength Key as Singapore Grows as Global Trading Hub

singapore

Singapore has developed one of Asia’s most advanced financial services industries on strengths including a central location in Southeast Asia, a government committed to minimizing its market intervention and a diverse trading community.

Equinix recently helped produce a white paper that provides an overview of the Singapore markets and identifies trends and opportunities there.

We’re particularly interested in taking people inside Singapore as we prepare to open a new data center there next year. SG3 will be our third facility in Singapore and our largest data center in Asia-Pacific, with 5,000 cabinets and more than 375,000 square feet of colocation space at full build out.

The demand for interconnection in Singapore’s financial services industry is only increasing. Our white paper looks at a few reasons why:

OTC Strength

The over-the-counter (OTC) derivatives market in Singapore ranks 8th globally by trading volume and makes up 5% of total global OTC derivatives trading volume.

Singapore began imposing stricter regulations on OTC derivatives after the G20 meeting in Pittsburgh in 2009. Among them:

  • standard OTC contracts
  • mandated central clearing of OTC derivative trades
  • trading of OTC contracts on approved platforms
  • mandated reporting of OTC contracts traded or booked in Singapore

“Singapore is setting itself up to be an international OTC hub. A large number of transactions are booked out of Singapore from global entities because of Singapore’s mature infrastructure giving it an advantage as a trading center.”

FX growth

Foreign exchange (FX) is one of the fastest-growing asset classes in Singapore’s OTC market. Singapore’s FX trading volume ranked 3rd in the world in 2013.

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“In September 2013, Singapore overtook Japan as Asia’s biggest foreign exchange center for the first time, making it the third-largest such hub in the world after London and New York.”

Partnership with China

China announced in October 2013 that would allow direct trading between the Singapore dollar and the Chinese yuan, also known as renminbi. A month later, it announced that China-registered companies will be able to list in Singapore – a move viewed as a significant opportunity for the Singapore Exchange.

“With strong ties to China and South-East Asia, Singapore’s position as a platform for investing in Asia market will be strengthened in the long term and the financial services industry will continue to grow and develop.”

Connectivity

As OTC trading and clearing move toward exchanges, electronic trading of different OTC derivatives is set to increase dramatically. That will create demand for faster network connectivity, financial infrastructure innovation, increased data integrity and more sophisticated services. The partnership with China also increases demand for interconnection in Singapore.

“This increased integration between Singapore and China will drive the need for stronger global ‘ecosystem’ connectivity as cross-border investment is relatively complex and platforms need to be able to support the fast and complete flow of information.”

Learn more about the interconnection and other features of SG3 in this video.

Access the entire white paper here.