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DBS forex (FX) traders and salespeople started undergoing the bank's training programme for treasury and markets professionals last month.
The classes could not have come sooner for Chze Wee Meng, 30, an assistant vice-president of treasury and markets at DBS. The junior salesman of FX products with less than a year on the trading floor has found that it can get nerve-wrecking when billions of dollars a day are traded.
"The standards required of a treasury-and-markets practitioner are high and for newcomers like me, it is especially daunting," he said of the fast-paced environment which requires him to handle products of various asset classes and degrees of complexity.
The industry itself has undergone significant change since the global financial crisis (GFC); it is unclear what the GFC did to it, but it has certainly not slowed things down. In fact, the opposite is true: FX volumes have skyrocketed and Singapore has become a big winner in the business.
Rajesh Yohannan, the chief executive of forex broker Oanda Asia Pacific, is unsurprised by this. He said that, in the first place, the major events of the last five years have been related to FX. The US easing resulted in investors wanting to hedge out the US dollar (USD); the Europe liquidity crisis led to traders clearing out euros, and the Bank of Japan stimulus, to speculators shorting the yen. Now, with the emerging market (EM) currency mini slump, foreigners are selling EM currencies and buying back the USD and the euro, he said.
"We are seeing huge money flows moving literally from one side of the world to the other and back again," he said.
Against this backdrop, Singapore has leapfrogged Japan to become the third-largest FX centre in the world - after London and New York - and the largest in Asia. Global banks and multinationals are increasingly basing their regional or treasury headquarters here.
The latest survey by the Bank for International Settlements (BIS) notes that the average daily FX turnover volume here grew 44 per cent to US$383 billion in April, against US$266 billion in April 2010. Global turnover growth was 35 per cent during that period.
Trading in foreign exchange markets averaged US$5.3 trillion per day in April, up from US$4 trillion in 2010 and US$3.3 trillion in 2007.
FX swaps were the most actively traded instruments that month, at US$2.2 trillion per day, followed by spot trading at US$2 trillion.
"The increasing concentration of FX trading in large financial centres . . . suggests that a rising proportion of trading takes place between counter-parties located in these centres, although they could be headquartered elsewhere," said the BIS, in what bankers said was a description that fit Singapore to a T.
Elaborating, Matthew Cannon, HSBC Singapore's head of global markets, said that while the majority of global trade is conducted in USD, local costs and many end-user revenues are paid and received in the local currencies of the countries where these transactions take place.
Further, many companies do not state their accounts in USD, though many of their transactions are done in USD.
Mr Cannon added: "All this leads to the need for foreign-exchange services among our trade customers. Given the regional commercial and financial hub status of Singapore, the nature of our client base here is significantly more international than in most other countries."
Lutfey Siddiqi, UBS Investment Bank's co-head of foreign exchange, said: "There has been a growth in the number of global multinationals choosing Singapore as a regional treasury centre. At the same time, we've seen prominent chief investment officers and senior portfolio managers of global stature locating their funds in Singapore."
Donne Lee, DBS' managing director of treasury & markets, said these funds use Singapore as a platform to diversify into Asia-related investment vehicles. "This requires the conversion from currencies such as the euro and USD to the Singapore dollar and other Asian currencies, which explains the increase in FX volume here."
The Swiss National Bank (SNB) opened its branch here in July - its first overseas office in the bank's history of more than 100 years - to manage its foreign reserves and monetary policy. Its Asian currencies amount to almost 12 per cent of the bank's foreign assets of more than US$50 billion.
Assets managed by fund managers in Singapore grew 21.5 per cent to $1.63 trillion last year due to strong inflows and higher market valuations, said the 2012/13 edition of the Monetary Authority of Singapore annual report.
About 80 per cent of the assets under management were sourced from outside Singapore, and more than 70 per cent was invested in the Asia-Pacific region, up from 60 per cent in 2011, and reflecting Singapore's role as an asset-management hub for both regional and international investors.
The number of investment professionals rose 8.5 per cent to reach 3,312 last year.
Global banks are the major beneficiaries of the increase in forex activity.
UBS said Singapore is its single trading hub in Asia for FX, rates and credit. This year, it located both its Asia-Pacific co-heads of foreign exchange here.
Mr Siddiqi said: "The annual turnover across Asia Pacific has more than doubled in three years."
Nadir Mahmud, Citi Asia-Pacific head of markets, said some of the bank's biggest clients are sovereign wealth funds, hedge funds, real money investors and corporates.
Citi has 15 per cent market share of Singapore's FX volumes; its FX growth volumes have gone up two to three times in the last four years, he said.
Deutsche Bank is the largest provider of liquidity to Asian currency markets, with a 19.81 per cent market share, said David Beale, the bank's co-head of fixed income & currencies and commodities sales for Asia.
"Probably the most significant drivers impacting the FX business have been the evolution of electronic trading and the significant increase in volumes traded via e-platform versus voice trading," he said.
Agreeing, forex broker Oanda's Mr Yohannan said that high-frequency traders are found not only in banks: "An increasing number of individuals run algorithms on our systems, executing numerous trades in seconds. When we first launched mobile trading a few years ago, some of our beta testers actually placed unintended trades accidentally, most commonly because they forgot to lock their phones. We call this 'pocket trading'."
DBS' FX/swap turnover combined has grown over the years from an approximate daily average of US$12 billion in 2011 to US$17.5 billion currently, said Kwa Woei Kyet, the bank's head of FX liquidity, treasury & markets.
Many banks have their FX options, spot and forward desks based here, which creates more FX liquidity and efficiency in the market. Many also use Singapore as a hub to develop their electronic FX trading engines, said Eddie Listorti, ANZ's co-head of fixed income, currencies and commodities. ANZ has located more than half its FX options staff here, he said.