Spark Systems has big ambitions to bring more of the world's currency transactions to Asia.
The Singapore-based newest upstart trading venue for foreign exchange will start a live trial of its currency platform next month, hoping to lure traders with lower fees than existing offerings in the city.
The company won financial support from the country's central bank and is part-owned by Dymon Asia Capital, the US$5.5 billion (S$8 billion) investment manager whose currency hedge fund returned 56 per cent last year.
Spark is counting on prominent patrons to help it break into the US$5.1 trillion-a-day foreign-exchange market, long dominated by major Western financial firms.
Its goal is to create a venue for Asia-based institutional investors to trade with each other in Singapore, instead of routing orders to London or New York, according to chief executive Wong Joo Seng.
While Singapore's share of currency transactions has climbed in recent years, the city is still a distant third in the global rankings - a gap that both the central bank and regional money managers are keen to narrow.
"It would be a big advantage if the liquidity pool improved," said Mr Ashvin Murthy from the AVM Global Opportunity Fund in Singapore.
Mr Wong, 53, has been a fixture in the Singapore financial scene for three decades, running local brokerage GK Goh Financial Services from 1998 until 2014. He also co-founded M-DAQ, which developed technology for exchanges to price stocks in foreign currencies and is now backed by Alibaba Group Holding's Ant Financial.
Dymon hedge fund owns more than a third of Spark through its venture capital fund and is prepared to dilute its holding over time to allay potential client concerns over neutrality and confidentiality, according to Mr Jinesh Patel, who runs Dymon's venture capital arm.
The Monetary Authority of Singapore said its support for Spark is part of a $225 million plan to fund technology and innovation in the financial industry, while declining to disclose the size of Spark's grant.
The start-up has also raised US$6.5 million from investors including Vickers Venture Partners.
Spark's prospects will depend on its ability to convince major traders to use its platform, according to senior analyst at research firm Aite Group, Mr Javier Paz.
Spark aims to differentiate itself by charging lower fees than competitors. It will cost US$3 or less for every US$1 million worth of trades on Spark's platform, versus US$5 to US$15 for existing venues, Mr Wong said.
He wants to attract speed-sensitive traders, some of whom currently send orders offshore.
Mr Wong says it takes about two milliseconds to match an order in Singapore, versus 200 milliseconds to route it to New York or London.
The US and UK handled about 56 per cent of the world's currency trades last year, compared with about 8 per cent for Singapore, according to the Bank for International Settlements.
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