Singapore has one of the most advanced financial services industries in the

Singapore has one of the most advanced financial

This preview shows page 36 - 38 out of 44 pages.

Singapore has one of the most advanced financial services industries in the region and is at par with international standards. Singapore attracts high levels of overseas investments as it builds a reputation as an offshore financial center. Singapore has a significant OTC derivative industry. It ranks eighth in the world in overall OTC derivative trading accounting for around 5% of global turnover, and ranks fourth and fifth in OTC FX and IR derivative trading, respectively. OTC daily turnover is almost 10 times that of exchange-traded derivatives. Singapore is a special venue for OTC FX derivatives and ranks second in Asia (after Japan); 87% of FX turnover occurs in pairs that do not involve SGD, so that Singapore serves as an international trading platform. This trend can be seen from other aspects as well (i.e., 80% of funds under management in Singapore comes from overseas). Singapore is a hub for the trading of energy swaps in crude oil, gas oil, and fuel oil. Such products are increasingly in demand as hedging tools amid continued demand for key energy commodities, much of it driven by China. Commodity derivatives represent the fastest growing OTC product in Singapore. Singapore is the Asia-Pacific center for oil and rubber products. Global natural rubber output is dominated by its neighbors, including Thailand, Indonesia, Malaysia, and India. Singapore is actively trying to develop a commodity derivative segment by offering a concessionary tax rate of 5% for activities under Commodity Derivatives Traders (CDT) status commodity derivatives are big in the region and have good potential. In 2010, Singapore Mercantile Exchange (SMX) was launched in Singapore as the first Pan-Asian multiproduct commodity derivatives exchange. In the second half of 2010, SGX and its subsidiary, SICOM, moved to consolidate their commodity contracts on a single trading platform to integrate and enhance synergies between their commodity businesses. Figure 37: Singapore OTC Derivatives: 2012 Share of Turnover by Instrument Source: Celent analysis based on BIS, Singapore Foreign Exchange Market Committee, MAS, news sources Foreign Exchange 66% Interest Rate 28% Equity Linked 3% Commodities 4% Credit Default Swaps 2%
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Chapter: Individual Country Views and Insights 35 Singapore, though not a part of G20, has proactively agreed to implement G20 OTC derivative reforms; yet it wants to do them in its own way. So while it has taken steps and already implemented measures for central clearing of OTC derivatives (SGX Asiaclear), it does not want to force any mandatory central or electronic trading of OTC trades because it is very cautious about not hampering growth of the market while responding to global norms. Figure 38: 2012 Breakdown of Singapore OTC Derivatives Turnover by Participant Type Source: Celent analysis based on BIS, Singapore Foreign Exchange Market Committee, MAS, news sources As Singapore authorities push for more central clearing, a significant proportion of OTC trades will likely become standard trades clearable by CCPs over the next four to five years, with high migration of mainly IR and commodity derivatives to CCPs. MAS, the
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