Singapore gains momentum in arms race for currency trading hub status
Recent success in attracting peer-to-peer lender Lufax underscores Singapore’s growing appeal as a hub for new financial technology trading and wealth management platforms
Singapore’s embrace of fintech and its growing status as a hub for the trade of Southeast Asian currencies are giving the city state an edge in the arms race to attract internet platforms for trading and wealth management, according to one industry expert.
Oanda, an online forex trading company established in Toronto, Canada in 1996, chose Singapore as its corporate headquarters in Asia in 2007. The company, which also has Asian offices in Sydney and Tokyo, offers internet trading for both institutional and retail investors, with 75,000 clients worldwide.
The firm was co-founded by Michael Stumm, who is currently a professor of computer engineering at the University of Toronto.
Asia-Pacific has emerged as the company’s fastest growth market, representing 50 per cent of its business revenue and 65 per cent of trading volume.
“When the company choose to enter into Asia about a decade ago, we chose Singapore as our headquarters as it has a very active forex currency trading market and a lot of high net worth clients,” Oanda senior trader Stephen Innes told the Post.
“More importantly, Singapore’s government has encouraged fintech, which has led many banks and financial firms to move in to capture opportunities.”
Singapore’s appeal as financial hub came under the spotlight last week when Lufax, the peer-to-peer lending arm of Ping An Group, launched its internet platform for wealth management in the city state.
Lufax is reportedly the first mainland Chinese fintech firm to gain approval from Singaporean authorities.
Singapore’s average daily foreign exchange turnover amounted to US$517 billion, compared to New York at US$1.27 trillion, London at US$2.43 trillion and Hong Kong at US$437 billion, according to figures from April last year by the Bank for International Settlements, which carries out a survey of foreign-exchange trading in about 60 markets worldwide every three years.
Jasper Lo Cho-yan, the chief strategist at King International Financial, said tight margin trading is a key reason Hong Kong is losing out to Singapore and other financial centres.
The Securities and Futures Commission currently sets the minimum foreign exchange trading margin at 5 per cent, compared with 2 per cent in Singapore and the US, while London has no margin limit. The industry average is about 0.5 per cent, Lo said.
“The higher the margin, the more money investors need to pay to trade foreign currencies. The SFC needs to relax the margin requirement,” Lo said.
Innes said Singapore also has the advantage of being a hub for the trade of Asian currencies from Thailand, India, Malaysia and Indonesia.
“These Asian currencies have very active trading volumes. Singapore is closer to these Asian countries,” he said.
Oanda has no immediate plan to open an office in Hong Kong, even as traders in the city have become more active on its platform in recent years due to the internationalisation of the yuan.
Innes, a native of Scotland, joined Oanda about 7 years ago after a career in foreign currency trading that included positions with a number of big banks.
“Retail investors have increased their trading online while institutional investors have done the same,” he said.
Last year trading volume in the foreign exchange markets totalled US$5.2 trillion, with 50 to 60 per cent executed electronically, according to the BIS survey.
“The digitisation of forex markets has transformed the business which in the past carried the banner as the wild west of global banks trading rooms and has [since] morphed into a legitimate asset class that is widely embraced by institutional and retail investors alike,” Innes said.
He said electronic trading platforms can add more features such as news, research and analysis to customers.
“The ease of access and increased transparency offered on electronic platforms now appeals to a broader customer base, including retail traders who now view foreign currency trading as an investment in the same breath as both bond and equity asset classes,” he said.
Innes said proper regulation has helped fintech development in Singapore.
“While some see the regulatory clampdowns as excessive, increased market surveillance will continue to appeal to investors, and one can only expect electronic venues will continue flourishing despite increased regulatory oversight,” he said.