Vivek Shankar

Singapore: Exploring the extraordinary regional growth in electronic FX trading

July 2022 in Regional Perspectives

Rapid technological improvement and an environment that fosters electronic innovation are boosting e-FX volumes in Singapore.

Vivek Shankar investigates.

The Bank for International Settlements’ 2019 Triennial Central Bank Survey ranked Singapore third behind London and New York when evaluating FX turnover, slightly ahead of Hong Kong. Three years on, Singapore has made massive strides in closing the gap to the first two places on that list.

In April 2021, The Singapore Foreign Exchange Market Committee (SFEMC) also announced the results of its semi-annual survey of FX volume in Singapore which found that average daily reported FX turnover was 13% higher than October in 2020. This underlines the city-state’s growing importance in the FX world and success that the Monetary Authority of Singapore (MAS) has had in positioning it as a leading FX trading hub.

A MAS spokesperson explains, “Since 2013, Singapore has been Asia’s largest FX trading center and the third-largest globally, by volume. In recent years, the position of Singapore’s FX industry has been further bolstered by the development of e-trading infrastructure by key global players.”

Results of Singapore FX and FX Derivatives Market Turnover Survey April 2021
Source: The Singapore Foreign Exchange Market Committee (SFEMC)

Growth drivers

Singapore’s geographical location has played a role in its rise as a financial hub. The city-state offers proximity to Asian clients, helping banks fulfill growing FX service needs in the region. MAS points to Asia’s export and import volumes as evidence of a fast-growing FX market.

e-FX trading hubs continue to be established in Singapore

MAS continues to collaborate with institutions to help launch their e-FX hubs in the city-state, underlining how geographically well-positioned Singapore is to offer low latency connections to regional markets and the sophisticated technical infrastructure it has to offer.

For example Deutsche Bank has launched an e-FX pricing engine in Singapore, strengthening the firm’s ability to offer best-in-class execution in EM currencies and NDFs. Nomura preceded them, launching its e-FX pricing engine in the city-state in May 2021. Nomura highlighted the ease of plugging their solution into Singapore’s infrastructure, giving their clients the ability to quickly access top-notch execution in NDFs and G10 spot. Meanwhile, RBC Capital Markets and Northern Trust are two other firms that have launched e-FX pricing engines and servers in Singapore whilst Integral has launched its IntegralFX service in SG1 becoming the first complete cloud-based FX SaaS platform in the data center.The growing interest in trading emerging market currencies combined with Singapore’s leading position as Asia’s regional FX hub is expected to see NDF volumes in the region continue to grow rapidly. LSEG has recently launched its NDF Matching platform in Singapore to meet the growing needs of FX market participants in the region. It is currently establishing integration test environments for NDF Matching with a view to go live in summer 2023. As Singapore’s technological sophistication grows, more firms will undoubtedly follow suit as they rush to satisfy demand emanating from Asia.

Asian exports were two-fifths of worldwide volumes in 2021. The continent imported a third of worldwide imports in the same year. Asia attracted more than half of foreign direct investment (FDI) flows in 2020. Increased electronification in FX trading workflows has helped Singapore capture the majority of trading volumes. 

Electronic workflows help market participants centralize and consolidate their sales and pricing in a single venue. An MAS spokesperson pointed out that Western and Asian multinational corporations house their regional headquarters in Singapore, making it a base for risk management and treasury functions.

“Second, the critical mass of Singapore-based banks, asset managers, insurers, and treasury centers, alongside platforms and high-frequency traders, form a deep pool of liquidity across diverse currencies,” they added.

Singapore’s proximity to the majority of Asian market participants also ensures low latency. MAS notes that some market participants reported round-trip time savings of up to 400 milliseconds by executing orders in Singapore. Thanks to low latency and better execution, higher trade/fill ratios are easy to achieve. In turn, client demand increases due to better service standards.

However, location alone does not explain Singapore’s explosive growth in the e-FX world. This position is a result of careful planning on the MAS’s part. The launch of the FX E-trading Ecosystem in 2018 was instrumental in positioning Singapore as a pillar of exceptional execution services.
“MAS launched an FX E-trading (FXET) Ecosystem initiative in 2018 to catalyze the growth of the e-FX market in Singapore,” an MAS spokesperson explains. “At the time, although the bulk of e-FX sales and trading desks for the Asia timezone was based in Singapore, pricing and matching were done in other centers such as New York and London.”

This situation led to lengthy order routing, leading to Asian market participants experiencing poor execution quality. As global demand grew, the FXET Ecosystem grew, attracting waves of LPs and liquidity takers. The MAS states that more than 20 participants have set up FX pricing and matching engines in Singapore, with the FXET Ecosystem including a mix of LPs, liquidity takers, MDPs, and IDPs.

Market participant interest in leveraging Singapore’s role as an eFX trading hub in Asian time zones is only growing. MAS is well aware of this demand and is working to improve infrastructure and regulation that boosts growth. “We are working with the industry to draw in more platforms and participants through our FXET grant scheme and look forward to further improving liquidity and trade execution for our market,” an MAS spokesperson said.

Talking CBDCs, blockchain, and cryptocurrencies with MAS

Fintech is a broad sector encompassing several applications. While consumer-facing fintech has gained mainstream attention, fintech is rapidly changing how firms execute FX trade workflows. The MAS has played an instrumental role in encouraging the growth of the fintech ecosystem, along with the use of innovative tech such as blockchain.

A MAS spokesperson explains that the authority is adopting a technology-neutral, risk-appropriate stance when approaching innovation. MAS collaborates with the fintech and financial industry to explore blockchain use cases, offers grants, and boosts talent development schemes.

Wholesale CBDCs offer immense potential

CBDCs have garnered a great deal of attention lately. MAS approaches the topic by differentiating between retail and wholesale CBDCs. A spokesperson for the authority clarified that while the case for a retail CBDC is not compelling currently, MAS is keeping an open mind.

To ensure their ability to issue retail CBDCs in the future, the regulator is developing relevant technical infrastructure via Project Orchid. Wholesale CBDCs are far more attractive to the MAS, given their uses in cross-border payments and trade finance.

The spokesperson mentioned that the MAS has been experimenting with blockchain and DLT solutions since 2016 in collaboration with other like-minded central banks and the private sector. Initiatives such as Project Ubin inspired JP Morgan, DBS Bank, and Temasek to jointly establish Partior, a commercial blockchain-based multi-currency interbank clearing and settlement network.

“MAS continues to encourage FinTech innovation in this space and is partnering with the Bank for International Settlements Innovation Hub, Reserve Bank of Australia, Bank Negara Malaysia, and South African Reserve Bank on Project Dunbar,” the spokesperson said. “The project developed a blueprint for a multi-CBDC platform, which will allow financial institutions to transact directly with each other in the digital currencies issued by the participating central banks.”

MAS also collaborated with Banque de France on an experiment exploring automated market-making and liquidity management for cross-border payment and settlement. The experiment was supported by J.P. Morgan’s Onyx and simulated cross-border transactions involving multiple CBDCs (m-CBDC) on a common network between Singapore and France.

The crypto question

Regulators worldwide have begun grappling with legislating cryptocurrencies following cataclysmic events in those markets. Citing the example of the recent Terra/Luna meltdown, a MAS spokesperson stated that MAS frowns on cryptocurrencies as investments for retail investors.

“They (cryptocurrencies) are unlikely to perform the functions of money as prices of such instruments are subject to sharp speculative swings, and they have no fundamental value,” the spokesperson said. “However, MAS recognizes that the technology underpinning cryptocurrencies and the broader crypto phenomenon could be transformative for finance.”

The applications of blockchain, tokenization and cryptography can jointly enable the fractionalization of high-value assets and the monetization of previously locked assets. These use cases can unlock new economic value and deliver frictionless financial services, goals that MAS is keen on achieving. 

“MAS recently launched Project Guardian, a collaborative initiative with the financial industry to explore the economic potential and value-adding use cases of asset tokenization,” explains a MAS spokesperson. “The first industry pilot led by DBS Bank Ltd., JP Morgan, and Marketnode (an SGX-Temasek joint venture) involves the creation of a permissioned liquidity pool comprising tokenized bonds and deposits.”

The regulator continues to test industry initiatives under Project Guardian and explores the feasibility of asset tokenization in the markets. This forward-thinking approach will undoubtedly serve Singapore well as innovative technology continues to make its way into FX workflows and beyond.

These efforts are in conjunction with the Singapore Economic Development Board’s efforts to position the city-state as the leading corporate treasury hub in the ASEAN region. The government offers incentives such as a tax rate of eight percent on income derived from finance and treasury services. Firms offering international fund and treasury management, corporate finance and advisory, investment research, and credit control benefit from this policy.
Singapore also attracts the majority of fintech funding in the ASEAN region. A report by PwC and the Singapore Fintech Association highlighted that companies in the city-state received 51 percent of funding in the region. This interest has a knock-on effect on the technical infrastructure that supports e-FX services. Other initiatives, such as defining five digital banking licenses SWIFT GPI’s integration with the local Fast and Secure Transfers (FAST) service, have led to a robust digital finance ecosystem that only boosts Singapore’s desirability as an e-FX service destination.


Demonstrating deep liquidity, transparent pricing, and low execution costs, the Singapore Exchange’s (SGX Group) FX markets are another regional hotbed of activity. SGX is Asia’s largest USD clearing house and the largest RMB clearing house in the world outside China. Thanks to offering a multitude of execution and trading protocols such as off-exchange blocks and CLOB electronic trading, SGX FX is many traders’ go-to choice.

“We have witnessed consistent growth in demand from the macro funds and CTA community along with a spike in demand via brokers and agencies,” says KC Lam, Global Head of Rates and FX, FICC at SGX. “The growth has a broad base with a noticeable increase in trading from the West.”

Lam also points to significant activity from commodity hedgers, funds and banks – including the direct participation from banks and their agency business. Lam points to SGX’s CNH and INR futures as the most prolific instruments on the exchange. SGX’s RMB futures posted a record monthly volume of USD 154.9 billion in May 2022 while its INR futures recorded daily volume of USD 4.69 billion and record open interest of USD 3.78 billion on 22 April 2022.

The INR and CNH FX futures contracts, which are SGX’s flagship FX futures products, are amongst the top 10 most traded listed FX futures contracts globally, based on average daily volume in 2019-2021.

KC Lam

“Our Korean Won and Taiwan dollar futures contracts are gaining traction as key FX levels get tested,” Lam says. In May 2022, SGX’s Korean Won contracts posted a monthly traded volume of USD 1.62 billion, while its Taiwan dollar contracts’ monthly traded volume stood at USD 235.7 million.

SGX also offers the most liquid trading venue for USD/SGD futures, with monthly traded volume of USD 1.73 billion in May 2022. With its growing relevance and liquidity in Asian FX futures, SGX is attracting more traders who are focused on trading multiple Asian currencies onexchange.

As SA-CCR and UMR Phase 6 come into force, exchange trading activity has increased. Lam notes that several market participants turned to SGX to hedge their FX risk. “The notable increase in trading activity in FX blocks across SGX’s listed FX products points to how traders are finding it easier to transact several contracts on SGX without negatively impacting market prices,” he says. “We have also seen interest from asset managers in tapping our FX futures liquidity using EFPs and EFR facilities.”

Lam notes that demand from asset management end-clients seeking more capital-efficient format in trading and hedging FX exposure is increasing.

In March 2022, SGX added USD/INR month-end futures to complement its flagship INR/USD offering, a move that strengthens the exchange’s Indian Rupee derivatives ecosystem and enables participants to engage in crossproduct strategies in a highly capital-efficient format.

“We continue to receive clients’ requests from time to time for us to list new contracts, and this is something that we always work closely with the market to validate and review the need and scope for new products and solutions that best serve their needs,” Lam added. He also points to SGX’s commitment in helping clients navigate regulatory changes as a key reason for sustained volumes.

“We are committed to helping clients understand regulatory developments,” he says. In December 2021, SGX hosted a panel discussion on UMR Phase 6 at the FIA Asia event, engaging speakers from State Street, Cassini Systems, and HESTA SuperFund, to drive education on the newest UMR requirements.

In the past couple of years, SGX has also introduced enhancements that help market participants maintain a competitive foothold. The exchange acquired BidFX and MaxxTrader in 2020 and 2021 respectively, paving the way for a unified access point for FX OTC and listed futures in the region.