How Digital Infrastructure Cements Singapore’s Position as Asia-Pacific’s Foreign Exchange Hub
As the world’s most liquid asset class, foreign exchange (FX) has always provided scope for organizations to capitalize on technological developments which create revenue-generating opportunities for themselves and their customers. As such, the global FX market continues to grow year on year.
Supporting this growth today is the global nature and sophistication of FX markets. The availability and widespread adoption of electronic platforms mean FX markets are more responsive and connected than ever before. One country which has been accelerating its FX advancements is Singapore. Progressive governance from Singapore’s central bank and regulator, the Monetary Authority of Singapore (MAS), has resulted in strong uptake and investment from FX brokers—enabling Singapore to establish itself as Asia-Pacific’s largest FX market.
Singapore: Top financial center in Asia-Pacific
According to the latest Singapore Foreign Exchange Market Committee turnover data, Singapore’s total monthly turnover reached US$15.6 trillion in October 2021. Its average daily turnover column rose over the same period, with spot transactions up 36%, outright forwards by 95% and FX swaps by 54%.
This growth can be attributed to the Foreign Exchange E-trading Ecosystem strategy from 2018. This was an initiative from the MAS to entice banks and trade platforms to set up in Singapore. In 2020, J.P. Morgan successfully set up its operations under this scheme with its new electronic FX trading and pricing engine. Similarly, Barclays and Deutsche Bank have also deployed their trading and pricing engines, enabling clients to execute FX transactions faster to benefit from localized price distribution.
Beyond banks, the London Stock Exchange Group is also launching an FX matching engine in Singapore to expand the range of execution venue choices for customers in Asia-Pacific, enabling them to capitalize on the region’s growing FX share. All of these developments are driving an increasing demand for reliable, low-latency interconnection solutions to provide instant and direct access to key financial markets in the Asia-Pacific region.
The building blocks of Singapore’s FX trading landscape
Minimal trading costs, 24×7 trading availability, high transactional transparency and liquidity are the key features that make FX such a popular form of trading. However, there are numerous factors a firm must consider in order to provide traders with a reliable, predictable, and robust platform. With ambitions to firmly plant Singapore onto the global FX trading map, the nation is gearing up to increase its appeal by addressing key factors which affect FX trades, including:
1. Latency and trade execution
Traders require ultra-low latency to react to rapid currency fluctuations in real-time. An immediate response to changing market conditions is vital to avoid the risk of trading on outdated information, which ultimately affects the profitability of trades. Singapore has been strengthening its digital connectivity and infrastructure to provide the lowest latency times, both domestically and internationally, between its peer FX trading hubs.
In an ultra-competitive and volatile market, it’s no longer just about executing the fastest trades. Institutions now need to tap into digital finance ecosystems to connect to partners, customers and networks to benefit from more efficient trading not just within Singapore, but in the region and globally.
3. Rise of cloud trading
Electronic trading (e-trading) ecosystems consist of participants hosted across a variety of platforms, including multiple public and private clouds. The instantaneous and interconnected nature of e-trading requires seamless interoperability between platforms and counterparties. Further, Singapore’s open embrace of cryptocurrencies is boosting its overall position as a financial center. Crypto exchanges bring a new dimension to e-trading and often utilize public clouds, which must also integrate into the broader e-trading ecosystem.
4. Emerging markets
Emerging market currencies in Asia have grown considerably. In 2019, China’s currency, the renminbi, accounted for average daily volumes of US$284 billion and was the eighth-most traded globally. Similarly, India’s rupee was the 16th most traded currency globally in 2019, with an average daily volume of US$113 billion. As other Southeast Asian countries become more developed and digitalized, Singapore’s proximity and partnerships with these markets become advantageous.
Realizing the competitive advantages of digital
In line with Singapore’s move to expand its overall share of global FX trading, Equinix continues to enhance our FX ecosystem in the country to support the thriving financial services industry. With Equinix’s FX hubs situated in the world’s largest FX markets, namely Singapore, London, New York and Tokyo, our interconnected platform – Platform Equinix® – enables FX brokers to execute trades more efficiently and shave off milliseconds between Singapore and its overseas counterparts.
For example, Sparks Systems, an FX trading platform that processes US$600 billion worth of daily transactions in Singapore and elsewhere across Asia, leverages Platform Equinix to execute trades efficiently. Through the deployment of localized trading infrastructure in Equinix’s SG1 data center, Sparks was able to minimize latency in its trading infrastructure. Their interconnected platform provides direct access to the world’s largest multi-asset class e-trading ecosystems, including foreign exchange, equities, fixed income and derivatives service providers, execution venues and trading platforms.
Furthermore, as compliance is crucial across markets, competitive organizations must adhere to ever-changing regulations and manage technology risk. The ASEAN Financial Innovation Network (AFIN) leverages Platform Equinix to match regional fintech companies with financial institutions. This collaboration provides a dedicated on-premise API Exchange (APIX) sandbox platform on Platform Equinix for financial institutions (FIs) and offers fintechs a fast-provisioning and affordable, enterprise-grade, cloud-like, single-tenanted bare metal server for production services.
Equinix’s International Business ExchangeTM (IBX®) data centers are also certified to meet rigorous certification standards. In Singapore, our IBX data centers received the Outsourced Service Provider Audit Report (OSPAR), one of the most authoritative security certifications for financial institutions, and a detailed Threat and Vulnerability Risk Assessment (TVRA), a set of requirements issued by MAS for all Singapore-based financial institutions with overseas physical presences.
Through all these partnerships and infrastructure advancements, Equinix can continue supporting the ongoing efforts by MAS to further grow Singapore’s prominence as a regional e-trading hub for FX.
The next evolutionary step
Digital ecosystems and infrastructures enable institutions to boost their competitive edge in Singapore’s FX industry. As digital strategies unlock superior advantages in latency, efficiency, security and agility, the possibilities of FX and e-trading continue to expand.
Equinix’s mature FX ecosystem has demonstrated a critical role in shaping these opportunities, both regionally and globally, for major banks, FIs and retail FX brokers to interconnect on a fast, secure and reliable platform. Learn more about how Equinix can support your demands for low-latency solutions in FX markets with future-ready digital infrastructure.