FTSE, Singapore Exchange Sign Broad-Ranging Derivatives Pact

Singapore Exchange Ltd. has partnered with global index provider FTSE Russell to expand its suite of derivatives products, after MSCI Inc. earlier this year chose Hong Kong to license some of its offerings in this space.

SGX and FTSE will introduce products across multiple asset classes, including those linked to the latter’s benchmark indexes for fixed income, listed real estate, global equities and currencies, according to a statement from SGX. The products will focus on Asian and emerging markets and will cater to growing demand for ESG investments, it said. SGX shares rose as much as 1.8%, the most in almost three weeks.

SGX has been taking initiatives to boost business after being hurt by the MSCI’s decision in May, when it said it will move licensing for derivatives products on a host of gauges to Hong Kong from Singapore. Earlier this month, SGX announced plans to start trading futures contracts on indexes of real estate investment trusts across Asia excluding Japan.

“On equity derivatives, you should expect broader launches even on countries outside of Asia” as well as single-stock futures for more Asian markets, SGX’s Chief Executive Officer Loh Boon Chye said in a press briefing. “You should expect more rollout of products in the months to come.”

FTSE, Singapore Exchange Sign Broad-Ranging Derivatives Pact

Earlier this month, SGX said it will partner with FTSE Group to launch 13 futures contracts on regional and country indices in Asia, following an announcement in July that the two firm will jointly launch Taiwan futures. This came after the bourse introduced single-stock futures in its platform in the city-state in June.

The latest partnership should “help mitigate the impact of loss of MSCI contracts” that had been expected to hit earnings in the range of 10%-15%, said Krishna Guha, an analyst at Jefferies Financial Group Inc.

Even as they touted the new deal, analysts said liquidity will take time to build. While it will be easier to migrate customers of MSCI’s country-focused equity derivatives to FTSE’s, “for the other new contracts that SGX has in mind to launch with FTSE, it usually takes some time before they are able to build good liquidity for good contribution to revenue,” said Rui Wen Lim, an analyst at DBS Bank Ltd.

While FTSE has “good” partnerships with North American bourses for index derivatives, “Asia is a growth market for us, there is huge demand for all asset classes,” Waqas Samad, CEO of FTSE Russell, said during the online briefing. “Partnering with SGX is a natural solution for us.”

©2020 Bloomberg L.P.

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