Singapore's Image As Regional Financial Hub Gets An Uplift With The Launch Of New Exchange For Commodities Trading

 By: Manish Gosh
Singapore's financial market landscape will have a new player by the end of August - the Singapore Mercantile Exchange (SMX), the first pan-Asian multi-product exchange. The Monetary Authority of Singapore (MAS) granted 'Approved Exchange' (AE) status to SMX on 12 August 2010, the final approval needed to operate as a regulated and licensed exchange.

SMX offers a comprehensive platform for trading a diversified basket of commodities including futures and options contracts on precious metals, base metals, agriculture commodities, currencies and commodity indices. Four derivatives products will initially be on offer at the SMX namely, West Texas Intermediate and Brent crude oil futures, gold futures and euro-US dollar futures. The SMX's target is to pick up between 3 and 5 percent of the 7 billion derivatives contracts traded in Asian markets. SMX will be offering Singapore's first gold futures contract with physical delivery at vaults in Singapore.

SMX's key agenda is to create a viable Asian price discovery and benchmarking system, Asia which has evolved to become the leading producer and consumer of commodities still concurs with the western markets which are the price setters. Being at proximity to the productions centers and the consumption markets it will facilitate transparent price discovery based on demand supply fundamentals. The state-of-the art electronic trading platform allows for multiple connectivity option and enables vibrant commodity trading within the Asian markets during Asian time zone.

Singapore is already the third largest oil trading center after New York and London, the top bunker port in the world, the fifth largest foreign exchange trading center and the eighth largest center for over-the-counter derivatives, and with the SMX coming live on August 31st, it will play a pivotal role in the commodities market drawing international investors and trading houses to its shores. Singapore is well positioned to transit from being a regional hub to a global commodities trading hub.

Welcoming the exchange, Ms. Rebecca Lee, a senior team member at said "Singapore as an international financial center aims to establish itself as the Asian commodity trading hub. The new generation international commodity and derivative trading platform is no doubt a significant milestone to this effect. In fact, the government had announced tax incentives in 2004 to promote commodities derivative trading sector in Singapore, and last year the incentive scheme was further enhanced by relaxing certain restrictions on CDT companies and by extending the 5% concessionary corporate tax rate to 2013. The pan-Asian exchange will escalate Asia's role in the commodities trading market. Most of the international trading houses are turning towards the Asian markets to hedge and Asia will continue to be a major engine of growth for the global commodity market. In this scenario Singapore with its comprehensive industry infrastructure and efficient platforms will remain a preferred destination for investment companies, international trading companies and other financial sector players like brokers, analysts and fund managers".
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