Singapore

JUST barely three months after long-term partner MSCI Inc said it would migrate from Singapore to Hong Kong licensing for derivatives products on a host of gauges, Singapore Exchange (SGX) has found a new beau in rival index provider, FTSE Russell, to deliver new Asian multi-asset solutions.

On Thursday, SGX said it would build on its long relationship and track record in existing products with London Stock Exchange-owned FTSE to develop and market a multi-asset index derivatives offering focusing on Asian and Emerging Markets.

In the coming months, SGX and FTSE Russell will roll out products to meet the needs of global investors.

SGX said the need for high-quality access to Asia has become increasingly pertinent given the region's idiosyncratic risks exacerbated by ongoing geopolitical uncertainties.

The core products will be anchored around FTSE Russell's global benchmark indices for fixed income, listed real estate, global equities and currencies, catering for expansion to meet institutional investors' demand for SGX solutions in multi-asset, Environmental, Social and Governance (ESG), dividend, sector and duration strategies.

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign UpVIEW ALL

Speaking to The Business Times, SGX chief executive officer Loh Boon Chye said he has known Waqas Samad, CEO, FTSE Russell, and Group Director, Information Services, LSEG, since he assumed his role as SGX CEO and through the various partnerships.

"I reached out to all my partners, including FTSE," Mr Loh shared.

SGX and FTSE's partnership goes back a long way, to when they worked together to launch in 2006 the SGX FTSE China A50 Index Futures, the world's only USD-denominated futures offering investors access the China A-share market.

The news comes three months after MSCI signed a 10-year licensing contract with Hong Kong Exchanges and Clearing (HKEx) in May to launch a series of emerging markets products, dealing a blow to SGX's lucrative derivatives business and sent SGX share price south.

In its latest results briefing, HKEx revealed the first three tranches, which cover 33 of the 37 licensed products, already rolled out in Jul-Aug, including the MSCI Taiwan futures.

HKEx expects volumes to gradually ramp up as the open interests at SGX eventually expires in February 2021.

When asked if the tie-up with FTSE would change SGX management's guidance for a 10-15 per cent impact on FY2021 net profit, Mr Loh said the estimate given was a "conservative one" that assumed a complete drop in volumes and open interest. That has not been the case.

With the broader and expanded asset classes, this tie-up has the potential to deliver more.

Mr Loh said SGX and FTSE Russell have built one of the largest and most liquid FTSE equity index derivatives franchises for Asian markets.

In July, it saw the "fruits from the SGX FTSE Taiwan index futures", which generated a total turnover of more than US$1.5 billion in the first week of trading, with participation from 50 entities across 17 clearing members.

"With this expanded agreement with FTSE Russell, we will develop more unique tools to match evolving investor needs.

"FTSE Russell's leadership in the world of investable multi-asset products and ESG, together with SGX's leading position and unrivalled capabilities in Asian derivatives, will drive even greater impact and value creation for our customers."

SGX's multi-asset platform already provides global investors with a single point of access into Asia, offering extensive and efficient investment and risk management tools covering all major asset classes.

Mr Samad said FTSE has been focused on growing in Asia, a key market and growth driver, where it sees huge demand.

Partnering SGX is a "natural solution" for the group, given the successful relationship and SGX's reach across major markets including the US where FTSE too has customers.

"We also look forward to partnering with SGX to develop a range of index-based products to support the increasing need for sustainable investment solutions developed to globally recognised ESG standards, providing investors with further choice, diversification and risk management opportunities for their portfolios."

Exchange-traded-funds (ETFs) and derivatives based on FTSE Russell indexes are some of the most actively traded and liquid vehicles in the world.

The global index family includes well-known benchmarks such as the US large cap Russell 1000 Index, US small-cap Russell 2000 Index, Russell Style (Growth & Value) indexes and the FTSE 100, FTSE China 50 and FTSE Emerging Index.

About US$16 trillion is currently benchmarked to FTSE Russell indexes.

Earlier this month, SGX announced plans to launch Asia's first international Reit futures based on the widely followed FTSE EPRA (European Public Real Estate) Nareit Asia ex-Japan Index, as well as a range of Asia Ex-Japan and Emerging Markets Asia regional and single country futures based on Net Total Return and Price Return indices calculated by FTSE Russell.

The battle for business among major exchanges has been heating up, and in Asia, HKEx is turning up the heat as it looks to muscle in on SGX's A-share futures turf.

When asked about the latest status of the MSCI A-share futures and secondary listings inclusion into Southbound, HKEx CEO Charles Li said "positive momentum" is building but there is no tangible timeline.

Incremental revenue from the inclusion of mega-sized secondary listings like BABA into Southbound will be shared by HKEx and the mainland counterparts, hence a mutually beneficial move.

The mainland regulator is reviewing these new initiatives, and HKEx is optimistic about the outcome although the timing will depend on a myriad of factors.