Your Letters

Equities and derivatives markets are separate but complementary

The Singapore equities and derivatives (or futures) markets are two completely separate markets, with very distinct participants serving different needs ("SGX must strike balance between derivatives and equities" by Mr Tng Kim Bock; last Sunday).

Share prices of companies listed on our equities market are unaffected by trading in our offshore derivatives market.

The Singapore Exchange's equities market, or the Singapore stock market as most know it, provides a platform for companies to list and raise funding, through the mainboard and Catalist. It allows for investors to participate in the growth of these companies, including our local corporates and small and medium-sized enterprises (SMEs).

As Asia's most international exchange, SGX has attracted many overseas companies to list here. In the last three years, we have also supported $1.6 billion of capital raising for local SMEs, including three IPOsthis month.

Improving our equities market has been, and remains, one of SGX's priorities. In recent years, we introduced smaller board-lot sizes and reduced clearing fees to encourage trading, and market maker initiatives to improve liquidity. Last year alone, we reached 400,000 retail investors through SGX-organised investor education activities, and supported our listed companies with investor outreach events. To achieve the common goal of a successful and vibrant equities market for Singapore is a long-term process and will require all market participants to work together.

Our international derivatives market is completely separate from our equities market, offering futures contracts related to offshore equities, foreign exchange and commodities. Users of our derivatives markets are mostly institutional investors or companies which need to manage their risk exposures across Asia.

SGX's derivatives market has achieved the status of being the world's most liquid offshore market for key Asian equity index derivatives, and it has naturally grown with economic activity across Asia.

Though separate, both markets reinforce and complement each other in serving the needs of market participants. Both markets are vital to SGX's growth and success and to Singapore maintaining its position as an international financial centre.

Intensifying competition means our effectiveness as a hub for the region is assured only if we offer investors the ability to trade all of Asia in one place, whether through equities, fixed income, commodity or currency assets.

Chew Sutat
Head of Equities and Fixed Income Singapore Exchange

A version of this article appeared in the print edition of The Sunday Times on January 31, 2016, with the headline 'Equities and derivatives markets are separate but complementary'. Print Edition | Subscribe