Published On: Sat, Dec 19th, 2009

Will The SMX Change The Commodity Futures Landscape in Asia?

SMX CommoditiesWell it already has. First of all the Singapore Mercantile Exchange (SMX) is wholly owned by Financial Technologies, an Indian financial services company. Exchanges in Asia are owned and operated locally and have a close relationship with national regulators and business leaders. Some would say too close. The SMX is uniquely foreign owned and to have a regulator, the Monetary Authority of Singapore (MAS), governing at arms length fostering a competitive marketplace definitely changes the playing field.

Secondly, the SMX will be in a position to leverage the commodities industry of India. Financial Technologies also owns part of the Multi-Commodity Exchange (MCX) based in Mumbai and the Free Trade Agreement between India and Singapore sets the stage for the SMX to be the center of commodities trading in South East Asia.

Lastly, on a larger scale, the entrance of a foreign owned commodity exchange competing against a local incumbent, the Singapore Commodity Exchange (SICOM), signals that the dam has burst on monolpolistic trading venues across Asia. This is tectonic shift is certain to change the landscape in Asia.

The SMX also owns and operates the Singapore Mercantile Exchange Clearing Corporation (SMXCC) which will act as the central counter party to trading. ICICI and Standard Chartered Bank will serve as clearing and settlement banks.

The MAS granted regulatory approval to the SMX December 2 and the exchange plans to commence business after Chinese new year around February 15, 2010 with a small basket of products which are still being finalized. The SMX promises global cross-border trading in a wide range of commodity futures products (over 30) from agriculture, base and precious metals, energy, currency and a commodity index to rival the CRB index in the US.

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  1. Enrico says:

    Pretty interesting stuff and SMX should overtake SICOM pretty quickly if they get their launch right. Singapore always reiterates of the open, free economy but even this is surprisingly bold for the country.

  2. Steve says:

    You think SMX will overtake SICOM? Its hard to say. SMX seems on the right track but SICOM being part of SGX does have an established distribution and trade processing ability. Should be quite an interesting contest though.

    SGX is also going into the Dark Pool space with Chi-x called Chi East. Seems they are positioning themselves as a real institutional trading center in Asia.

    Thanks for the comment Enrico.

  3. Proactive Investments says:

    Looks like a good move for Singapore and will offer a more competitive marketplace within Singapore. From an international perspective it would appear that a more open and competitive marketplace is good for Singapore and good for Asia traders / investors.

    Really looking forward to seeing how SMX works out in the coming year — may just attract quite a bit of traders internationally.

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