Singapore steps up clearing push for commodity trade

Singapore's financial regulator will work with commodity exchanges, investors and producers to support the development of the city state as a trading centre, including the expansion of clearing houses in Asia.

The entry of new clearing houses could boost liquidity and encourage the development of products, the Monetary Authority of Singapore said.

Clearing houses helped improve risk management in derivatives markets during Asian hours, it added.

Singapore, about one-quarter the size of Rhode Island, sits close to the equator on the sea lanes between China, Japan and India, Asia's three largest economies.

Neighbour Indonesia is the world's largest producer and exporter of palm oil and tin, the third-biggest producer of cocoa and a major exporter of coffee, while Thailand is among the top three shippers of rice and sugar along with being the biggest producer of natural rubber. Clearing houses operate as central intermediaries between counterparties, reducing risks of default for users and investors.

"Clearing of commodities is definitely a possibility and it's an area where no other market in the region except Australia can actually have an advantage," said Stephane Loiseau, the head of cash equities and global execution in Asia-Pacific at Societe Generale. "That is more likely to be successful than the push in listed derivatives because they are not directly competing with anyone."

Singapore Exchange, Southeast Asia's biggest bourse, is expanding its derivative trading, and faces competition from Intercontinental Exchange and Deutsche Boerse.