Given a shifting regulatory climate and the upcoming introduction of new margin requirements on uncleared derivatives on a global basis, Singapore Exchange (SGX) has opted to introduce a new instrument to its offering – a series of Asian emerging markets (EM) index futures. The index series will be the first of its kind in Asia, based on its unique calculations and exposure.
In particular, the new series will be based on net total return (NTR) indices calculated by MSCI Inc. This is important as it will make SGX the only venue in Asia to effectively offer both price return and NTR versions of MSCI equity index futures via exposure to the new index series. As such, the new EM index futures will aim to provide a more broad-based risk-management service for market participants looking for exposure to Asia’s four largest emerging markets of Taiwan, China, India, and Indonesia, which presently represent over 50% of the MSCI Emerging Markets NTR IndexSM.
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New Levels of Exposure into Leading Economies
The EM index series will also help garner an exchange-listed solution to over-the-counter (OTC) equity index swaps in Asia. SGX’s new offering also represents a further bid to enable exposure into Asian markets. It has established itself as one of the region’s principal risk-management hubs. The new contracts themselves will include the follow index futures in each of the aforementioned EM economies:
- SGX MSCI Taiwan Net Total Return (USD) Index Futures
- SGX MSCI China Free Net Total Return (USD) Index Futures
- SGX MSCI India Net Total Return (USD) Index Futures
- SGX MSCI Indonesia Net Total Return (USD) Index Futures
According to Michael Syn, Head of Derivatives at SGX, in a statement on the new index series: “We continue to offer global investors unique offshore access to Asia, and these futures will provide a cost-efficient platform to trade and clear NTR index products. Today’s launch also highlights the growing importance of central-clearing counterparties in Asian markets.”
SGX recently reported its May volumes, which saw healthy growth across several key segments of its business as well as 2017 highs in terms of its FX trading. Its EM business has also seen strong increases in 2017, including the trading of its FTSE China A50 Index Futures, INR/USD and USD/CNH futures volume, providing a further impetus behind the new series offering.