What is the Singapore Exchange?
The Singapore Exchange (SGX) is an investment holding company that operates one of Asia’s leading financial marketplaces.
SGX operates the most liquid, offshore marketplace for trading the major equity indexes of China, India, Japan and the Association of Southeast Asian Nations (ASEAN). The exchange plays an important role in providing liquidity in the Asian marketplace.
SGX provides a full range of services:
|Markets||SGX operates regulated and liquid marketplaces for trading equities, fixed income and derivatives.|
|Clearing and Settlement||The Central Depository (CDP), a wholly owned SGX subsidiary, provides clearing and settlement for SGX securities market products including:|
|Depository||The CDP also operates as a central securities depository for SGX. This function allows the book-entry transfer of securities rather than the transfer of physical certificates.|
|Listings||SGX operates an international marketplace for the listing of shares and bonds:|
|Data Services||SGX offers a comprehensive suite of data products for market participants including:|
History of the Singapore Exchange
The holding company that operates SGX was formed on December 1, 1999, and it acquired the assets of three predecessor exchanges:
- Stock Exchange of Singapore (SES)
- Singapore International Monetary Exchange (Simex)
- Securities Clearing and Computer Services Pte Ltd (SCCS)
Each of these exchanges received shares in the new entity known as Singapore Exchange Limited.
On November 23, 2000, SGX listed its shares for trading on its own exchange. SGX became the second exchange in Asia Pacific to have its shares listed via a public offering and private placement. (* Shares of the Australian Stock Exchange (“ASX”) began trading in 1998).
Key Events in the History of SGX
|Investment||Bombay Stock Exchange||2007||SGX acquires a 5% stake.|
|Opening||Beijing office||2008||Expansion into China.|
|Joint Venture||Nomura’s Chi-X||2009||This partnership, which received approval from the Monetary Authority of Singapore (MAS) in 2010, created a dark pool trading platform.|
|Opening||London Office||2010||Decision to open office is part of a $250 million investment in Reach, a new faster trading platform based on Nasdaq OMX technology.|
|Partnership||NASDAQ OMX||2011||Partners collaborate on a suite of tools to support companies listed in Asia.|
|New Initiative||Dual currency trading||2012||SGX provides for trading of stocks, bonds and other investments in both Singapore and US dollars.|
|Acquisition||Energy Market Company||2014||SGX acquired the remaining 51% of Energy Market Company (EMC). It acquired a 49% stake in 2012. EMC operates Singapore’s wholesale electricity market.|
|Acquisition||The Baltic Exchange||2016||The Baltic Exchange is the world’s only independent source of maritime market information for the trading and settlement of physical and derivative shipping contracts.|
Who Are the Singapore Exchange Executives?
SGX is organized into 10 divisions, including the office of the President, which report to the CEO. Four additional divisions report to the President. SGX has a management team and board of directors with decades of both industry and financial markets experience.
|Kwa Chong Seng||Chairman||Kwa has served as a director on the SGX Board since September 2012 and Chairman of the Board since September 2016. He has 40 years of experience in the petroleum industry.|
His current roles include:
|Loh Boon Chye||Chief Executive Officer||Loh has served as CEO since July 2015. He also serves as an Executive and Non-Independent Director on the SGX Board. Loh has 27 years of experience in the financial services industry.|
His recent roles include:
Between 1995 and 2012, Loh held various roles with Deutsche Bank AG:
|Muthukrishnan Ramaswami (Ramu)||President||Ramaswami was appointed President in 2012. He oversees operational aspects of SGX including:|
Ramaswami previously held senior positions at Citigroup in Operations, Technology and Transaction Banking in various locations including Mumbai, Singapore, Hong Kong, London and New York.
|Chng Lay Chew||Chief Financial Officer||Chng oversees Finance, Treasury and Investor Relations as well as the Facilities Management Unit. |
He has 30 years of experience in accounting and financial management.
In his previous role, Chng oversaw the finance functions of DBS Group’s operations in all countries outside Singapore.
|Agnes Ko||Chief Risk Officer||Koh was appointed Chief Risk Officer in January 2014. She is responsible for advocating for and leading enterprise risk management activities at SGX including:|
Koh joined SGX in 2005. She is a chartered accountant and a member of the Singapore Institute of Chartered Accountants.
How is the Singapore Exchange Regulated?
SGX oversees the regulation of the exchanges and clearinghouses it operates, and in that role, functions as a self-regulatory organization (SRO). In addition, SGX works closely with three outside agencies that have regulatory oversight in the securities industry:
- Monetary Authority of Singapore (MAS): An integrated supervisor overseeing all financial institutions in Singapore — banks, insurers, capital market intermediaries, financial advisors, and the stock exchange.
- Commercial Affairs Department (CAD): Part of the Singapore police force that supports the nation’s Anti-Money Laundering/Counter-Financing of Terrorism (AML/CFT) framework.
- Accounting and Corporate Regulatory Authority (ACRA): The national regulator of business entities, public accountants and corporate service providers.
SGX has adopted six key principles that inform how it conducts regulation of its markets:
|1||Disclosure-based regulation||Providing timely, accurate, and adequate disclosure of all matters needed to make informed decisions about SGX listed products.|
|2||Comprehensive risk management||Making the safe and efficient operation of SGX clearing houses a very high priority.|
|3||Risk-based targeting of regulatory activities||Allocating greater regulatory resources to sponsors, member firms and matters that pose the greatest regulatory risks.|
|4||Balanced approach to international best practice||SGX aims to ensure that its rules and regulatory activities are consistent with international best practice for exchanges.|
|5||Transparency||SGX consults market users, where appropriate, on the proposed introduction of new products and initiatives. The exchange also aims to keep the public informed via its website.|
|6||SGX as frontline regulator and managing regulatory conflict||Maintain a collaborative relationship with regulatory and enforcement agencies such as the MAS, CAD and ACRA on matters such as:|
SGX self-regulatory functions cover the following six areas:
|Listing Compliance||Ensuring that listed companies comply with exchange rules|
|Member Supervision||Admitting and monitoring members to ensure compliance with SGX rules.|
|Regulatory Development and Policy||Providing input for SGX initiatives and helping craft new solutions and policies.|
|Listing Policy and Product Admission||Developing the listing policy of SGX and managing the SGX listing manual.|
Traders can consult the regulatory section of the SGX website to learn more about each of these regulatory functions.
What Products Does the Singapore Exchange Trade?
SGX products fall into three categories: securities, fixed income and derivatives.
|Securities||Stocks||Investors can buy and sell ordinary (common) and/or preference (preferred) shares depending on the company.|
|Real Estate Investment Trusts (REITs)||Professionally managed funds that invest in income generating real estate assets.|
|Exchange Traded Funds (ETFs)||Open-ended investment funds that attempt to replicate the performance of an underlying index or asset class (such as commodities)|
|Leveraged and Inverse Products (L&I)|
|Daily Leverage Certificates (DLCs)||A DLC offers investors fixed leverage of three to seven times the daily performance of the underlying index it tracks.|
|Structured Warrants||Products issues by financial institutions that enable investors to participate in the price performance of an asset at a fraction of the asset price.|
|American Depositary Receipts (ADRs)||Shares that trade in the United States and represent an investment in a foreign company.|
|Fixed Income||SGX offers bond trading to both retail and institutional investors. Retail traders are restricted to purchasing only certain types of fixed income products. SGX has a separate trading platform for institutional bonds traders.|
|Derivatives||Equity Index||Track the performance of benchmark indexes.|
|Equities||Single stock futures (SSFs) track the performance of individual stocks.|
|Dividend Index||SGX is the first exchange in Asia to trade dividend future contracts.|
|Foreign Exchange||Futures and options contracts on major Asian currencies.|
|Interest Rates||Futures and options contracts on bonds.|
|Iron Ore and Steel||Swaps and futures contracts.|
|Rubber||Futures and forward contracts.|
|Freight||Dry bulk futures and options.|
|Coal||Swaps and futures contracts.|
|Petrochemicals:||Swaps and futures contracts.|
|Gold||Physically deliverable Kilobar gold futures contract.|
|Oil||Swaps and futures contracts on refined oil and fuel oil products.|
|Natural gas||Swaps and futures contracts on liquefied natural gas (LNG).|
|Electricity||Quarterly and monthly base load electricity futures.|
How Does the Singapore Exchange Conduct Trading?
The SGX conducts trading on its exchange with two different trading engines. Each one is designed for trading specific asset classes:
Securities traders on the SGX use the Reach trading engine developed by NASDAQ-OMX and built on its Genium platform. This platform offers high speed and reliable access. Traders can purchase one of two REACH access plans depending on their needs:
- SGXAccess Fix is designed to allow traders to connect to SGX with minimal reconfiguration or redevelopment of their trading systems.
- SGXAccess API offers faster trading speeds and lower latency. This connection gives traders access to the market through a proprietary application interface.
Derivatives traders on the SGX use the Titan trading engine developed by NASDAQ-OMX and built on its Genium INET version 4 platform. This platform also offers high speed and reliability and can support a range of functions including order sending, market feed, quotations and drop copies of transactions. Traders can purchase one of two Titan access plans depending on their needs:
- Titan DT API provides access to the Titan DT trading engine using a proprietary application interface on the Genium trading platform. Trading participants can choose access speeds ranging from 10 to 50 transactions per second. Traders can access this service via one of four ways (see below).
- Titan DT OUCH/ITCH offers faster trading speeds and lower latency. This connection gives traders access to the market through a proprietary application interface.
SGX offers four options for connecting to its trading engines:
- SGX’s Managed Network Service: SGX can procure, configure and manage connectivity for its customers
- Co-Location Service: SGX offers three tiers of service for colocation or proximity hosting to SGX markets. High-frequency traders would most likely require these services.
- Liquidity Hubs: SGX offers a connection to its market engines through a variety of global Points of Presence (PoPs).
- Approved Network Service Providers: SGX works with approved Independent Software Vendor Platforms (ISVs) that can offer a connection to the exchange.
What Type of Memberships Are On Offer?
SGX offers different types of memberships for both securities and derivatives traders:
Securities Membership Options
|Trading Member||Market participants who choose to offer specialist equities execution-only services can become a Trading Member.|
Trading Membership requirements:
Remote Trading Member requirements:
|Clearing Member||Clearing Members have clearing rights. Their role is to act as a third party clearer for Trading Members and themselves (if they have trading rights).|
Clearing Member requirements:
|Trading and Clearing Member||Clearing and Trading members must meet the following requirements:|
Derivatives Membership Options
|Trading Member||A Trading Member can hold customer accounts and monies and has to clear its trades through a Clearing Member. Trading Members can be located offshore.|
Trading Membership requirements:
Remote Trading Member requirements:
|Clearing Member||Clearing Member requirements:|
|Trading Member (Proprietary)||A Trading Member (Proprietary) trades solely for its own account and or for the proprietary account(s) of its related/associated corporations.|
Trading Member (Proprietary) can be based offshore, and there are no licensing or base capital requirements for Trading Member (Proprietary).
Trading Member (Proprietary) has to appoint a Clearing Member to clear its trades.
Traders can consult the membership section of the SGX website for more details and application forms.
What Are the SGX Margin Requirements?
The CDP requires collateral from participants to protect against the possibility of a Clearing Member defaulting on an obligation. The amount of collateral required depends on several factors.
CDP uses two cut-off times (* snapshots are taken at 11:30 am and market close. Margin calls will be issued by 2.30pm and 6.00am (the following day) respectively) to determine margin for client portfolios. It then calculates Maintenance Margin (MM) and Variation Margins (VM) for each portfolio.
Factors including market volatility and traded value of the portfolio can impact margin.
Maintenance margin: After posting initial margin, a market participant is required to keep up maintenance margin, which is the amount of equity required to retain an open position. Maintenance margin covers potential risk to a confidence interval of at least 99%.
Variation margin: This is the payment of additional funds that may be deemed necessary when the account balance falls below the maintenance margin or initial margin requirement.
Traders should consult the CDP Clearing Rule Practice Note 6A.5.2 Calculation of Amount of Clearing Member Required Margins for further details.
What Are the Fees and Charges?
Securities traders at SGX pay the following transaction fees excluding structured warrants:
|Trading Fee||0.0075% of traded value|
|Clearing Fee||0.0325% of traded value|
|Goods and Services Tax||Prevailing GST rate|
Trading fees for structured warrants are 0.001% of traded value, while clearing fees for those products are 0.004% of traded value.
Fees for derivatives vary by contract type. Traders should consult the clearing schedule on the SGX website for more details.
What Market Data Does SGX Make Available?
SGX provides a variety of market data and news feed options for its customers:
|Securities Market Direct Feed||Real-time price information directly from securities trading engine.|
|Derivatives Market Direct Feed||Real-time price information on all SGX futures and options contracts direct from the trading engine.|
|Post-Trade Data Feed||Service for viewing and managing trade orders independent of main trade access.|
|SGX News||Real-time corporate statements and action announcements.|
|Historical and Reference Data||Daily, weekly, monthly and yearly historical data including:|
Traders should consult the SGX market data section of the website for policies and fees regarding data usage.
What Educational Materials Does SGX Offer?
SGX operates SGX Academy, which provides trader education and training to traders of all skill levels.
Traders can search this section of the site by course level, date, prices and course category. Categories include in-person seminars and courses held in Singapore, E-training and live events held with SGX partners.
Topics cover every aspect of trading and investing. E-courses offered through SGX Academy include the following:
- Business and Market Cycles
- What Moves the Market?
- Economic Indicators
- Diversifying Your Portfolio
- The Math Behind Trading
- How to Place Orders
- Reading Annual Reports
- Benefits of Exchange Traded Funds
- Financial Ratio Shortcuts
SGX / CBOE Partnership
SGX has a partnership with the Chicago Board of Options Exchange (CBOE), which is one of the leading options exchanges in the world, to offer options education e-courses. These courses are designed for all skill levels of trading and allow students to learn at their own pace. Traders can consult the CBOE Options Institute at SGX for more details.
SGX periodically holds live webinars for its trading community. Webinar speakers are experts in their fields and offer structured lessons on topics of interest to market participants. Traders can get more information at the SGX Academy website.
Does the Singapore Exchange Have Vendor Partners?
SGX works with many outside vendors that supplement the trading and clearing experience. The following vendors provide data for the securities and/or derivatives markets at SGX:
- ACTIV Financial Systems Inc
- Apex International Financial
- Blashnet Co Ltd
- Bloomberg Finance L.P.
- Capital IQ, Inc
- Capital Master Pte Ltd
- CarryQuote AG
- CQG Singapore Pte Ltd
- eDaily Co Ltd
- FactSet Research Systems Inc
- Fidessa PLCFMR, LLC
- GlobalView Software Inc
- HiThink Flush Information Network Co Ltd
- Imagine Software Inc
- Interactive Brokers LLC
- Interactive Data Real Time Services
- Investment Technology Group Inc
- IRESS Data Pty Ltd
- Jiji Press Ltd
- LiquidNet Asia Ltd
- Market Data Ltd
- MarketPrizm Ltd
- MarketSource International Pty Ltd
- MorningStar Real-Time Data Ltd
- N2N Connect Pte Ltd
- NextVIEW Pte Ltd
- OptionsXpress Inc
- QuantHouse SAS
- Quick Corp Ltd
- Shanghai DZH Limited
- Singapore Press Holdings Pte Ltd
- SIX Financial Information Ltd
- SunGard Financial Systems (France) SAS
- Sysjust Corporation Ltd
- Systex Corporation
- Telvent DTN Inc
- TD Direct Investing (Europe) Ltd
- Thomson Reuters Asia Pte Ltd
- VWD Vereinigte Wirtschaftsdien AG
- Yonhap Informax Inc
The following ISVs has been tested and approved by SGX for providing order management solutions:
|Fidessa Group PLC||www.fidessa.com|
|Fusion Systems Ltd||www.traderaptor.com|
|Itiviti Group AB||www.itiviti.com|
|RTS Realtime Systems||www.rtsgroup.net|
|Tata Consultancy Services||www.tcs.com|
How Can You Start Trading?
Many regulated brokerage firms offer contracts for difference (CFDs) based on products traded on SGX such as commodities or shares of Asian companies.
CFDs are a derivative instrument that offers retail traders a way to invest in financial markets. CFDs allow traders to use leverage to bet on the price of financial assets. The value of a CFD is the difference between the price of a financial instrument at the time of its purchase and its current price.
Many regulated brokers worldwide offer CFDs on shares, commodities, indices, forex and other financial assets. Customers deposit funds with the broker, which serve as margin. The advantage of CFDs is that traders can have exposure to financial assets without having to purchase shares, ETFs, futures or options.
Traders can open an account at one of these regulated brokerage firms and begin trading CFDs based on SGX products.