Slow start for FT's overseas bourses

The two new international bourses started by Financial Technologies in Singapore and Mauritius have registered minuscule volumes so far.

The average daily turnover on the Singapore Mercantile Exchange (SMX), a wholly-owned unit of Financial Technologies, has been $4-5 million since its launch on August 31, data on the SMX website showed.

In sharp contrast, Financial Technologies-promoted Multi Commodity Exchange, which accounts for over 80 per cent of India’s commodity futures market, has clocked average daily turnover of about Rs 60,000 crore ($13.64 billion) this month.

The Singapore-based SMX offers futures trading in gold, West Texas Intermediate (WTI) crude oil, Brent crude oil and euro-US dollar. However, liquidity in these contracts has been poor.

For example, euro-US dollar currency futures contracts expiring on December 13 saw a turnover of $1.45 million on Thursday. Similarly, gold futures expiring on December 27 recorded a turnover of $1.93 million, while West Texas intermediate futures expiring on November 19 generated a business of $2 million, according to the SMX data. The other contracts saw zero volumes that day.

“SMX is working through the challenges inherent in establishing a greenfield exchange, such as educating participants, market familiarisation, confirming and growing membership segments,” SMX Chief Executive Officer Thomas McMahon said in an e-mail reply to a query from Business Standard. “As the number of market participants increases and clearing members complete the stages of our internal processes, market participation and trading across current product lines will grow exponentially,” he added.

Trading in derivatives is growing at a rapid pace in Asia.

In the first half of calendar year 2010, derivatives contracts traded in the Asia-Pacific region rose 52 per cent year-on-year to 4.2 billion, according to data from the Washington-based Futures Industry Association.

“I expect SMX to pursue product development in commodities that are most leveraged to the demand and supply forces of developing Asia,” said Geoff Howie, sales and markets strategist at MF Global Singapore. “One doesn’t need to look much beyond cotton futures to realise that this time zone plays a strong role in establishing product niches to redefine price-setting parameters,” he added.

The Global Board of Trade (GBOT), another bourse launched by Financial Technologies in Mauritius on October 18, has also attracted low volume so far.

The commodities and currency derivatives bourse offers trading in gold and silver futures and five pairs of currency futures. The average daily turnover on GBOT in the last few days has been $25-30 million, according to data on its website.

An e-mail query sent to the communications department of GBOT remained unanswered.