A new start-up is building a platform to make foreign exchange trading in Singapore cheaper and faster for institutional investors.
Spark Systems has raised US$5 million (S$7.1 million) in funding and is already working with a major hedge fund to beta test its platform early next year.
It officially opened its offices at fintech hub Lattice80 in Robinson Road earlier this month.
Singapore is the world's third largest foreign exchange trading hub - after London and New York - and there are already many proprietary foreign exchange platforms here.
But these platforms come with high transaction costs. There is also no common one linking up all buyers and sellers, Spark Systems co-founder and chief executive Wong Joo Seng told The Straits Times.
Mr Wong was previously chief executive at a financial services firm, where he experienced "phenomenally high" transaction costs for foreign exchange trades.
"When we were dealing with firms whose trading volumes were in excess of several trillion dollars per year, total transaction costs can be $6 million to $7 million per trillion. This means that about 40 cents of every dollar earned is used to pay the market operator."
In addition, transaction flows from Singapore usually go to London, New York and Tokyo because of the lack of a marketplace here.
Sending an order to Tokyo, the nearest trading centre, takes about 60 milliseconds. This stretches to 200 milliseconds for London and New York - which can be an eternity when markets are volatile.
"On a volatile trading day when markets are responding to Brexit, or the US presidential elections, the instruction to deal might reach the bank after the price has expired. This raises the incidence of order rejection," he said.
A Singapore-based exchange would be able to process orders much more rapidly, added Mr Wong, who is also a partner at venture capital firm Vickers Venture Partners.
"Spark exists because we can do the same job cheaper, better and faster."
He co-founded the company with chief operations officer Jason Wang, previously head of institutional sales at KGI Futures, and chief technology officer Ye Ting Song, who joined from US hedge fund Pine River Capital Management.
Spark Systems aims to eventually develop a Singapore-based foreign exchange marketplace, said Mr Wong.
It will do this by building private platforms for hedge funds and the bankers they work with, and then linking these platforms to create a network.
"There are many private platforms around now but they can't communicate with one another. On a Spark Systems network, when we have sufficient numbers of private platforms on board we can interconnect them all together and in so doing create one of the largest forex networks in the world," he added.
The company, which has also received a grant from the Monetary Authority of Singapore, plans to bring its solution to the market by the middle of next year.