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SGX mulls listing leveraged notes on speculators' demand

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Singapore Exchange Ltd is considering listing structured products called constant leveraged certificates, whose popularity in Europe helped market turnover there top US$4 billion last quarter.

[HONG KONG] Singapore Exchange Ltd is considering listing structured products called constant leveraged certificates, whose popularity in Europe helped market turnover there top US$4 billion last quarter.

"We are reviewing listing suitable products, based on market demand," Luuk Strijers, director and head of products at the exchange, said in a phone interview. "In Europe these products have been popular for many years, where investors are interested in simple leveraged exposure to regional indexes."

SGX is seeking to profit from appetite across Asia for more leveraged products that try to boost returns after a hiatus following the 2008 crisis when such structures exacerbated investor losses.

In June, the Hong Kong Exchange listed its first leveraged exchange-traded fund and the Singapore regulator published new guidelines on such ETFs last month. In Korea, another type of leveraged product called an exchange-traded note has seen a 300 per cent increase in volumes since last year.

In a leveraged certificate the issuer uses the futures market to borrow funds. Investors can make outsize returns from bets on short-term trends in equity and other markets.

The products differ from buying stock on margin as the investor can't lose more than the initial investment.

BLOOMBERG