SGX to boost volume by attracting High Frequency Traders

SINGAPORE : In a move to stay competitive, the Singapore Exchange (SGX) has unveiled several strategies to attract more traders and raise trading volumes.


This follows its recent failed bid to merge with the Australian Stock Exchange.

One of these will be to woo High Frequency Traders.

High Frequency Trading (HFT) is a type of computer-programmed trading which involves no human interaction.

It currently accounts for 30 per cent of the derivatives trading volume on the Singapore Exchange.

And SGX said it hopes to raise that level higher but declined to provide any targets.

Chew Sutat, Executive Vice President, SGX, said: "To grow the capital markets in Singapore, to support the capital markets in Singapore, growing liquidity is first and foremost.

As we know, listed companies need to find cheaper cost of capital in raising new money, and investors also want to have freedom of entry and exit into the market.

HFT potentially could support growing liquidity, making it more accessible for new capital and for investors to participate in the market."

Other initiatives to improve the bourse's competitiveness include reducing tick sizes, and increasing its product range to include metal futures.

A tick size is the smallest increment by which an exchange-traded instrument can move.

The smaller the tick size, the more accessible it is to investors. This in turn increases trading volume.

Chew Sutat said: "Obviously improving the efficiency of the market is a key objective that we have, and this includes reducing the cost of trading, for example through reducing the tick sizes of the spreads of the market, as well as continuous trading."

In addition, SGX will be the first Asian market to introduce pre-execution checks at the exchange level for the derivatives markets.

These are pre-trade risk controls, and can include the setting of risk limits in advance so that members can safeguard their trading activities.

This will take place in the second half of this year.

All these underscore the exchange's ambition to play a bigger role in the global financial system.

Magnus Bocker, CEO, SGX, said: "We need to go from that average market, that average financial market...to be one of the leading markets in the world. To go from being a good number 15 or number 10 to be number one, two, three or four."

Come mid-August, SGX will launch Reach, which cost S$250 million and is the world's fastest trading engine.

- CNA/ch