SGX’s focus on delivery excellence has become increasingly vital as global competition among exchanges intensifies. We maintain our customer focus, market-oriented regulation, and our operational and technological efficiency. By developing a strong post-trade processing hub, effectively managing our dual roles, and honing our technological advantage, we enhance our Asian Gateway status and build an enduring marketplace.
A post-trade processing hub
SGX is strengthening its position as a post-trade processing hub, providing a comprehensive range of clearing, settlement and depository services which leverage on SGX’s processing capabilities. Through our clearing business, we are better able to maintain market integrity by managing financial exposure, and to guarantee performance of trading obligations, while our settlement and depository business allows us to provide centralised custodial settlement, payment and corporate actions processing services.
SGX AsiaClear®
SGX AsiaClear®, our OTC clearing business and facility, has secured over 120 counterparty accounts within its first year of inception. Our intensive marketing efforts in Asia have resulted in a growing pool of Asia-based counterparties using the SGX AsiaClear® facility. This has also attracted rising interest from the European players to trade and clear on SGX AsiaClear®. Through this credit mitigation facility, we have lowered the barriers for many Asian OTC oil and freight derivatives market participants to trade with an expanded pool of counterparties.
SGX AsiaClear® has also been gaining good traction in its activities with US$1.2 billion in value of trades cleared in its first year. Four new products, including the unique Balance-of-Month Fuel Oil and Balance-of-Month Gasoil contracts, were added to our product suite in response to market feedback. Going forward, we are planning to augment our suite of 22 products to cater to the diverse and changing needs of the industry. Attesting to our value-added role in the OTC oil and freight derivatives market, SGX was named the Exchange of the Year at the Energy Risk Awards, Asia 2007.
JADE
SGX and the Chicago Board of Trade (CBOT) launched JADE (Joint Asian Derivatives Exchange) – an Asian commodity derivatives market. JADE was formed in response to demand from international players for a more accessible and consolidated platform to participate in
Asia’s booming but fragmented commodities markets. It leverages on the infrastructure
of SGX’s derivatives clearing house and the distribution of e-CBOT electronic trading platform. JADE launched the first TSR 20 Rubber futures contract, on 25 September 2006, and subsequently launched the world’s first US dollar-denominated crude palm oil futures contract
on 6 June 2007.
SGX Prime
SGX Prime is scheduled for launch in the third quarter of FY2008. It will provide greater operational efficiency to market participants by allowing open access to SGX post-trade systems and introducing the pre-settlement matching service to streamline securities settlement. Using internationally accepted ISO15022 messaging standards, SGX Prime will facilitate Straight-Through-Processing for market participants to increase automation and reduce operational risk.
Expanding custodial services
To expand the range of custodial services, SGX is working on the provision of collateral management services to consumer banks which are interested in leveraging on our processing capability for securitised lending. The collateral management services will be ready in the first quarter of FY2008.
Our dual obligations
SGX is both a regulator under the Securities and Futures Act and a commercial entity. Quality regulatory standards and the management of potential Self-Regulatory Organisation (SRO) conflicts are integral to SGX’s value proposition in operating its markets.
Public consultations
SGX’s rulebooks form the backbone of our regulatory framework. Public feedback is an important part of the rule-making process and forms a critical SRO safeguard against SGX abusing its rule-making powers to serve solely commercial objectives. SGX regularly conducts public consultations on proposed rule changes relating to our listing, trading and clearing services. From July 2006 to June 2007, we conducted seven public consultations on significant amendments, including amendments to the Listing Rules, new rules to govern the new board, changes to the minimum bid size schedule, and enhanced error trade policies for the securities and derivatives markets.
Updated Futures Trading Rules
In September 2006, SGX introduced a revamped Futures Trading Rulebook to govern trading on SGX-DT. Major features include updated provisions to take into account SGX’s complete migration from floor to screen trading, enhanced privileges to allow qualified customers to bypass pre-execution checks, and the introduction of physically deliverable futures contracts on the JADE market.
Oversight of corporate governance
On 29 May 2007, it was announced that oversight of corporate governance of listed companies would be transferred from the Council of Corporate Disclosure and Governance to the MAS and SGX, with effect from 1 September 2007. The move will clarify and streamline responsibilities for corporate governance matters for listed companies.
The Code of Corporate Governance will continue to be implemented through the SGX Listing Rules via the “comply or explain” approach. The Code, covering areas such as board matters, remuneration, accountability and audit, and communication with shareholders, will continue to complement SGX’s Listing Rules which govern specific important governance matters such as related party transactions, periodic reporting and disclosure of material information.
As the frontline regulator of listed companies, SGX will continue to work closely with other stakeholders to improve effective governance of listed companies.
Our technological edge
FY2007 marked the first full year of the outsourcing of our data centre and IT infrastructure services to Hewlett-Packard Singapore (HP). The handover to HP in February 2006 was smooth, and SGX’s various businesses continued to enjoy effective IT support.
Facilities upgrade
We crossed a milestone during the year when we teamed with HP to successfully upgrade our disaster recovery and production centres to world class ‘Tier-4’ data centre facilities. We will focus on consistently delivering highly reliable IT services to serve our customers even better.
Systems renewal
QUEST ST is scheduled to replace the existing CLOB trading system in July 2008. A number of securities trading members are also working with GL TRADE and SGX to modernise their trading front-ends, replacing the SESOPS terminals with a new order management system.
We will replace our derivatives data engine with a new system by the second half of FY2008. This would enable us to expand our data business.
Industry standards IT processes adoption
In order to ensure quality IT services and to minimise operational risks, we have embarked on an exercise to align our IT operational processes to an industry standard – ISO20000.
Business continuity
We continued to improve on our Business Continuity Planning (BCP) through awareness training, regular exercises, updating and refinement of continuity plans, and enhancing our response plans for a flu pandemic. SGX conducted a large-scale BCP exercise that included participation by trading firms from both the securities and derivatives markets in August 2006.
We also revalidated our ability to split the operation of our critical business functions between our back-up and primary facilities during the International Monetary Fund/World Bank Group Annual Meetings held in Singapore in September 2006.
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