Devang Bhatia

SGX CurrencyNode at the centre of OTC FX liquidity

September 2022 in Partner Content

Hosted in Singapore’s SG1 data centre, SGX CurrencyNode aims to become the leading anonymous Asian FX trading venue, connecting participants to deep and unique sources of liquidity especially in Asian EM currencies. In the first in our new series of features on fast growing trailblazing companies we think the market should pay close attention to, e-Forex spoke to Devang Bhatia, Chief Commercial Officer of SGX CurrencyNode to learn more about its plans.

In what ways will SGX CurrencyNode be looking to tap into the synergies within the SGX FX franchise: SGX, BidFX and MaxxTrader and how will that help you to deliver a more powerful and effective service offering?

We identified the gaps and opportunities in the FX market today, based on discussions with several clients across both the buy-side and sell-side. The investments in BidFX and MaxxTrader were the key steps towards laying the foundation for SGX CurrencyNode our ECN hosted in SG1, focused on Asian liquidity.

Our franchise clients who trade SGX’s FX futures and OTC FX via BidFX and MaxxTrader’s platforms have complementary liquidity and distribution requirements. With its central prime brokerage model, SGX Currencynode facilitates the onboarding and smoothens the credit challenges that our franchise clients face. The anonymous trading model also allows our clients to face each other without the need to setup bilateral credit lines or change their post trade confirmation processes.

What types of Institutional FX market participants are you targeting?

SGX CurrencyNode follows a curated approached to liquidity management based on calibrated data across the SGX FX franchise to match participants’ liquidity needs both in distribution and trading. Focusing on the needs of institutional clients across the buy-side and sell-side, our advance analytical methodology ensures that we discount the liquidity mirage and provide true and clean liquidity to all participants in line with the Global FX Code.

Over the last few years, MAS has been attracting global banks and non-bank FX market makers to deploy their pricing and distribution infrastructure in Singapore’s Data Centre

Singapore of course is the largest Asian FX trading centre. In what ways do you think SGX CurrencyNode will increase regional trade flows still further and act as a catalyst for othermarket activities?

Over the last few years, the Monetary Authority of Singapore (MAS) has been attracting global banks and non-bank FX market makers to deploy their pricing and distribution infrastructure in Singapore’s data centre. Currently there are several global market makers who have built out their pricing infrastructure in SG1.

However, given the limited liquidity matching and price discovery venues present in Singapore there is a gap for these market makers. For Asian currency pairs, global banks have traditionally been market making, but the deeper liquidity is usually with the local and regional market makers in their home currency. These regional Asian market makers have not found cost efficiencies building pricing infrastructure in global data centres like London or New York. The lengthy and tedious documentation and costly onboarding process with buy-side clients is another key challenge with these regional market markers, deterring them to distribute their pricing to buy-side clients.

How ambitious are your immediate growth plans and what new products and services will you be looking to roll out over the coming months?

SGX CurrencyNode went live late last year with a pilot set of clients for Spot Asian currencies, namely CNH, SGD and THB. We are now launching Asian NDF pairs – IDR, INR, KRW, PHP and TWD, after obtaining our Recognised Market Operator (RMO) licence from MAS.

Since going live, we have formulated the strategic direction on Technology, Management of Liquidity, Credit optimization, Operational efficiencies, and onboarded key prime broking partners to fill the gaps in the origination of Asian currency pricing and distribution from Singapore. In the next few quarters, we will bring deep unique liquidity from regional market participants to meet the growing global demand for Asian currencies.

SGX CurrencyNode plans to offer a hybrid solution to trade both OTC FX and SGX’s listed FX futures. Please tell us a little more about the product / services you offer and the benefits this model brings?

In less than a decade since the launch of its FX futures business, SGX garnered market-share leadership in many of the Asian listed FX futures such as USD/CNH, INR, SGD, KRW, and TWD futures. SGX FX has over 80% market share for CNH futures and 70% for INR futures. SGX’s CNH and INR futures contracts are among the top 10 most traded FX futures contracts globally, offering deep liquidity with an open, transparent venue for price discovery. With SGX CurrencyNode, we will be able to provide a single venue for market participants to achieve trading and settlement for both OTC FX and SGX’s listed FX futures and FlexC FX futures.

For OTC clients, SGX CurrencyNode connects global participants anonymously to unique and deep OTC FX liquidity pools through a single platform. One of the biggest benefits of this model is that it helps clients navigate the challenges brought about by the implementation of the Uncleared Margin Rules (UMR). As a starting point, SGX’s FlexC FX Futures were developed for participants to execute futures with a customised maturity date to better cater to the needs of participants who need precise tenors for their hedges. This was particularly useful for clients who need a more efficient centrally cleared product, i.e. FX futures, especially on the back of UMR.

Now, with SGX CurrencyNode, clients can look forward to a hybrid model where OTC FX and FX Futures are traded on one venue, which is especially useful in an evolving FX regulatory environment.