Singapore Looks to Establish itself as Global FX Trading Hub

With support from the MAS, firms are trying to cut order and execution speeds

A report published by Bloomberg on Thursday indicates that Singapore is making headway in its efforts to become a major hub in the foreign exchange (FX) markets.

Regulatory authorities in the small country are encouraging firms to start building trading engines in the country.

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Currently, FX trades have to be routed via locations, mainly Tokyo and London, outside of the city-state. That’s because most financial institutions have put their trading engines in those cities.

In doing so, it means that trading in Singapore can take a few milliseconds longer than it otherwise would.

And for the speed-seeking traders of the FX markets, those few milliseconds make a difference.

To ensure it can attract firms to its skyscraper sodden shores, the Monetary Authority of Singapore (MAS) has lent its support to firms looking to set up trading facilities in the small nation.

Those efforts have borne fruit. In the past couple of months UBS and Citigroup – two major financial institutions – have built FX trading systems in Singapore.

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A long way to go

One major appeal for FX firms is the city-state’s location. Nestled between several emerging markets and major financial hubs, trading orders can be executed quickly.

Whether that will be enough to lure firms to Singapore remains to be seen.

Still, for any firms that are unsure, the MAS is apparently willing to give them a cash-based nudge in the right direction.

Currency platform provider Spark Systems, for example, was given financial support by the regulator to set up shop in Singapore.

The regulator has not disclosed how much it gave to the firm but did say that the firm was a part of a S$225 million ($166 million) plan, announced in 2017, to fund technology and innovation in the country’s financial industry.

Last year, the top non-bank FX liquidity provider XTX Markets launched an electronic FX (eFX) pricing and trading engine in Singapore. The company’s effort was done in partnership with the Monetary Authority of Singapore (MAS),

Although it is now the largest FX trading jurisdiction in Asia, Singapore still lags far behind the US and UK.

Average daily FX trading is approximately $2.4 trillion in Britain and, for the US, the figure is just under $1.3 trillion. According to Bloomberg, Singapore’s FX traders are averaging $517 billion a day.

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