SGX's bond trading platform for institutional and accredited investors

We thank Mr Denis Distant for his feedback ("Is dark pool trading really the way to go?"; last Tuesday), which was in response to the article, "SGX to open dark pool in bond trading push" (Nov 19).

The article was referring to the Singapore Exchange's (SGX) platform that facilitates trading of wholesale Asian bonds, SGX Bond Pro.

This is for bonds, not for equities, and is available to institutional and accredited investors such as global asset managers, private banks and investment banks.

Such bonds are typically traded bilaterally (or over the counter), unlike equities.

SGX Bond Pro was developed in collaboration with an industry steering committee comprising wholesale participants in the corporate bond market.

They told us of the need to trade in a centralised venue that does not disclose their interest to others, so that they can place large orders without adversely affecting the bond's price.

This is because participants are likely to change the price if they see a lot of demand or supply in the market.

SGX Bond Pro provides this assurance of privacy and reduces search costs for participants.

The SGX closely monitors global regulations, and we are aware of regulatory scrutiny of dark pools, particularly in the United States.

The scrutiny relates primarily to equity liquidity pools operated by non-exchange affiliated entities, for instance, financial institutions with proprietary trading desks.

These raise concerns of undisclosed conflicts of interest, unequal access and failures to protect client information.

SGX Bond Pro addresses conflict-of-interest concerns by operating as a neutral and licensed market infrastructure provider, which does not have any proprietary trading or affiliates that trade bonds.

We have procedures in place to ensure equal access and market monitoring, to identify and address irregular activity.

We also apply strict standards of protection around confidential client information.

These are all part of SGX's commitment towards ensuring fair and orderly markets.

Tsai Li Renn
Head of Fixed Income Trading
Singapore Exchange

A version of this article appeared in the print edition of The Straits Times on November 30, 2015, with the headline 'SGX's bond trading platform for institutional and accredited investors'. Print Edition | Subscribe