Singapore looks to establish itself as global forex trading hub
Regulatory authorities in the Asian country are encouraging firms to set up fast forex trading platforms in the country that would remove the sub-second delay caused by routing trades via Tokyo or London.
As a result, UBS Group AG and Citigroup Inc., two major financial institutions have already set up trading engines in those cities and the Monetary Authority of Singapore (MAS) hopes to bring in six to eight more big players.
To ensure it can attract firms to its skyscraper sodden shores, MAS has also lent support to currency platform provider Spark Systems and London-based market maker XTX Market to set up trading platforms on the island. By so doing, trading in Singapore can take a few milliseconds longer than it otherwise would. And for the speed-seeking traders of the forex markets, those few milliseconds make a difference.
Chey, who is an assistant managing director of development at MAS has been quoted as saying:
“We are positioning ourselves to be plugged into growing Asian wealth. As this large macro shift in Asian economic growth and rising Asian wealth takes place over the medium term, we are trying to build out the efficiency of our ecosystem to close the gaps with other trading hubs."
Singapore forex market growth
While Singapore is already the biggest forex trading center in Asia by volume, the city is still a long way behind the United Kingdom and the United States, countries where investors exchange US$2.41t and US$1.27t respectively every day, according to the data from the Bank of International Settlements (BIS).
“Singapore has a good mix of real-money demand that has investment needs as well as risk management and hedging needs. When these demands are here and growing, the demand on FX and FX-trading volumes will rise commensurately.”
Singapore’s fx market growth has come at a cost for other hubs in Asia. Japan was once the predominant trading center in the region, it fell to third by average daily trading volume in 2016, just behind Singapore and Hong Kong. Investors exchanged $415 billion a day in Tokyo in April 2018, up 7.4 percent from the $386.3 billion recorded in October 2016, according to the Tokyo Foreign Exchange Market Committee.
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