Is Trayport Set To Dominate Asias OTC Markets Like They Have In Europe?
We have all heard that governments and regulators are pushing for more and more exchange traded and centrally cleared OTC (Over The Counter) derivatives and Asia is no exception. While Asia’s OTC derivatives business is relatively small globally growth has been robust. Recently, the Japan Financial Services Authority (FSA) published the results of a consultation on OTC trading and the results favored central clearing over bilateral settlement. Also, task forces in Korea, Hong Kong, China, Taiwan, Singapore and India have been created to study the industry and its affects more closely. The Singapore Exchange (SGX) has been clearing OTC freight, commodities and oil products through its AsiaClear arm which has 19 members and 33 interdealer brokers.
With all this attention and apparent adoption of central clearing of OTC will Trayport dominate Asia’s OTC markets? Trayport’s flagship platform is called GlobalVision of which there are 3 distinct products – Broker Trading System, Exchange Trading System and Trading Gateway. In Europe, they command a 90% market share in energy products of which 71% is traded OTC. They also have a global market share of around 70% for other asset classes, like Carbon Emissions, and supply their software to exchanges including BlueNext and Greenmarket in Europe.
Last week, here in Asia, Trayport announced the addition of new contracts on the J-Oil Exchange (JOX) in Singapore, a leading OTC oil and oil products marketplace, bringing the total products available to 609. The Exchange Trading System can support both regulated and OTC trading styles (the New Zealand Exchange and the Jakarta Futures Exchange are their customers) but their strength lies in the OTC market space.
Opportunities abound for OTC trading platforms here in Asia. Crude palm oil in Indonesia and Malaysia. India has a large commodities base and growing electricity market as well. China, the regional giant, will need to develop its markets of coal, steel, oil and rubber to name a few. In fact, China launched the Shanghai Clearing House late last year which could be a precursor for OTC clearing in the mainland.
Certainly, OTC clearing is part of Asia’s financial landscape and how big it will grow is anyone’s guess but with the breadth of experience and proven technology in Europe Trayport will surely be leading the pack to support exchange traded OTC products here in Asia.