Singapore's first over-the-counter Asian bond electronic trading platform was launched yesterday in an effort to create a liquid secondary market for such assets issued by Asian companies.
SGX Bond Pro, which began trading Asian corporate bonds in US dollars, euros and the yen, with Asian local currencies to follow, was set up under the Singapore Exchange's unit, SGX Bond Trading. It connects buyers and sellers of Asian bonds and provides them with multiple trading protocols that cater to their funding and investment needs.
The trading protocols facilitate access to liquidity for accredited investors, which include global asset managers and private and investment banks.
"The successful launch of SGX Bond Pro underpins our role as a leading market infrastructure provider, and is an important step in diversifying SGX's business mix," Mr Loh Boon Chye, CEO of SGX, said.
The successful launch of SGX Bond Pro underpins our role as a leading market infrastructure provider, and is an important step in diversifying SGX's business mix.
MR LOH BOON CHYE, CEO of SGX
In the wake of the global financial crisis, international dealers have not had the balance sheets they had previously, while regional dealers do not have the reach the big players have. That has led to a fragmentation of liquidity, especially with large block trades.
The secondary Asian bond market faces an institutional liquidity challenge as increasing fragmentation and concerns over information leakage and its resulting impact resulted in a prevalence of small trade sizes.
SGX Bond Pro's solution is to offer an electronic platform that facilitates price discovery and trade matching for all traders, as well as features that offer protection for institutional investors and encourage larger trade sizes.
To make it work, UBS was named in October as the general counterparty which acts as an in-between for the buyer and seller. The general counterparty maintains the anonymity of the traders.
"UBS is delighted to have been a party to the first trade on this new platform today. It is UBS' belief that the market is evolving and platforms, such as SGX Bond Pro and UBS' Bond Port, will play a vital role in the future of credit trading," said Mr Eric Lafon, the bank's regional head of foreign exchange, rates and credit distribution.
Mr Luigi Vignola, Julius Baer's head of markets and investment solutions group for Asia-Pacific, noted: "This new platform has the potential to become a game-changer on how we trade bond markets in the future."
Mr Biswaroop Tapan Barua, Standard Chartered Bank's managing director and head of fixed income for wealth management, said: "As the banking industry continues to undergo structural change, liquidity conditions in the overall bond market have deteriorated and an entrant like SGX will most certainly enhance liquidity in the Asian market."