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Chinese backers said to plan derivatives exchange in Singapore

Thursday, April 13, 2017 - 11:24

[SHANGHAI] Singapore may be set to get a third derivatives exchange, this time backed by China.

If the new bourse, which would be called Apex, goes ahead, it would be operated by Asia Investment Pte, according to people with knowledge of the matter.

Asia Investment is majority-owned by former China Financial Futures Exchange and Dalian Commodity Exchange chief Eugene Zhu Yuchen, with a minor stake held by the firm of hedge fund manager Ge Weidong, according to corporate records in the city-state.

Apex would be a potential challenger to Intercontinental Exchange Inc. and Singapore Exchange, which already operate bourses in the city.

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A Chinese-backed offshore exchange would dovetail with Beijing's drive to raise the country's status in global financial markets and bolster the presence of its companies around the world.

A mainland firm is seeking to buy the Chicago Stock Exchange, while the Shanghai Stock Exchange is reportedly close to acquiring a stake in Pakistan's national bourse.

Zhu's Asia Pacific Holdings Pte holds a 97.8 per cent stake in Asia Investment, according to the firm's corporate records, while Ge's Hong Kong-based Chaos Investment owns 1.6 per cent. Asia Investment has paid-up capital of US$12.2 million. Mr Zhu declined to comment when asked about the new venue. Officials in Chaos Investment's Hong Kong office didn't respond to requests for comment.

"We are still in the process of working with the Monetary Authority of Singapore to obtain a license as an approved exchange," Asia Investment said in a March 13 letter to Singapore's Accounting and Corporate Regulatory Authority. The firm was appealing to change its name to Asia Pacific Exchange Pte. and to reserve the name for at least a year.

The bourse could list commodity futures and interest rate options and swaps, according to two of the people, who asked not to be named because the talks are private.

Details haven't been finalized, the people said, and the plans are still at an early stage.  CME Group Inc, the world's biggest exchange operator by market value, was approached to take a stake in the venture but discussions didn't advance, according to another person.

A CME official declined to comment.

Singapore, where Mandarin is widely spoken, is a popular Chinese travel and investment destination. Mainland firms form the biggest group of foreign-listed companies on the Singapore Exchange, while the FTSE China A50 Index Futures is the most active derivatives contract in the city-state.

Exchange Delays

Some previous attempts to start derivatives venues in the Southeast Asian country have floundered. Singapore Mercantile Exchange Pte was bought by ICE for US$150 million in 2013 after suffering years of losses. The purchase gave ICE a license to trade and clear derivatives in Singapore. 

ICE's venue opened in November 2015 after three separate delays. The China Securities Regulatory Commission earlier that year had expressed concern to Singapore over ICE's plans to offer cotton and sugar futures. ICE has four trading members while SGX, the dominant exchange, has 53. An ICE spokeswoman declined to comment.

Deutsche Boerse AG, which opened an office in Singapore in 2009, said in September 2015 that it was delaying the start of its derivatives market in Singapore until this year, citing internal and external reasons.

"Deutsche Boerse is evaluating strategic opportunities and priorities," said spokesman Heiner Seidel.

"Asia is one element." Zhu and Tan Tock Siong, a former regulation chief at ICE in Singapore, are named as directors of Asia Investment in a filing with the Accounting and Corporate Regulatory Authority. The firm is based in Singapore's Marina Bay Financial District, and Mr Zhu is its chief executive officer, according to a copy of his business card. Mr Tan didn't respond to messages seeking comment.

To get approval, Apex would need to submit details including a three- to five-year business plan, the financial soundness of its shareholders and information about its risk management systems to the Monetary Authority of Singapore. The regulator said in an emailed reply that it does not comment on its dealings with individual parties.

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