The independent Republic of Singapore plays a central role in today’s global trading and financial landscape. With roots dating back to the 19th Century, the beginning of Singapore’s global relevance can be traced to its early days as a British trade port. Strategically located at the opening of the Straits of Melaka, the young, largely undeveloped island was rich in timber that could be used to build and repair ships, and surrounded by a deep natural harbor – an ideal location for maritime trade.
Now, almost two centuries later, Singapore has indisputably risen from “a poor port from the bottom rungs of the third world to the first world in a single generation.”1 In fact, a 2015 study by financial and professional services firm Jones Lang Lasalle and London-based strategy group The Business of Cities has named Singapore the third “most global city” for business, just behind New York and London.
As a key hub for finance, trade, transportation and commerce, Singapore’s role is getting recognition. The World Bank has ranked the island as the easiest place in the world to do business. Singapore is the world’s third largest center for oil refining and trading2, fourth largest financial center3, third largest center for foreign exchange4, and it’s been one of the busiest shipping ports in recent decades.
“In recent years, cities across Asia have begun to assume a greater role in global markets. We’ve seen an increase in regional trading activity across ICE’s benchmark commodity and interest rate products. In response to growth from Asian-based participants, we have established an exchange and clearing house in Singapore,” says Lucas Schmeddes, President and COO of ICE Futures Singapore and ICE Clear Singapore. “This investment is a logical next step and it represents our commitment to our expanding customer base and derivatives markets in Asia.”
New Risk Management Solutions for Asian Markets
ICE Futures Singapore offers the following contracts:
“Because the region is becoming one of the most important hubs for metal, oil and foreign exchange trading, businesses are seeking efficient trading, hedging and risk management solutions,” says Schmeddes in relation to the local trading requirements that ICE Futures Singapore and ICE Clear Singapore will meet.
Take, for example, the regional gold market. Despite global demand for gold dropping 12% to a six year low in Q2 20155, the regional trend in the last decade has been positive, with a 250% increase in consumer demand for gold in South East Asia according to World Gold Council research.6
The price of gold is important for both consumers and investors. As the price of gold can be volatile in times of economic stress, this impacts the prices at which participants buy and sell gold and therefore associated profits and losses. The ICE kilo gold futures contract is designed to help regional end users like jewelers and refiners hedge against price fluctuations by locking in the future price of gold today.
“Futures contracts like the kilo gold, mini Brent and Gasoil and onshore / offshore Chinese Renminbi that will trade and clear with ICE are part of our ongoing strategy to create an accessible infrastructure that meets the needs of both global and regional market participants,” adds Schmeddes.
ICE Futures Singapore contracts are cleared through ICE Clear Singapore, providing secure, capital-efficient counterparty clearing services. Both the exchange and the clearing house are supervised by the Monetary Authority of Singapore.
The ICE plan for expanding into Singapore
Info on the ICE Futures Singapore regional portfolio
Secure, capital-efficient risk management and post-trade services
1Allison, Graham (28 March 2015). "Lee Kuan Yew: Lessons for leaders from Asia's 'Grand Master'". CNN. Retrieved 2 April 2015.
2“Singapore Refinery,” Neste.
3 “Financial Centres of the World: Singapore,” Economics & Commerce Data.
4 “Singapore is 3rd Largest Forex Hub in the World,” AsiaOne20.
5 World Gold Council - Global Demand Trends.
6 World Gold Council - Emerging Trends in Market Development.