Deutsche Boerse delays Singapore derivatives launch to 2017

Deutsche Boerse chief executive Carsten Kengeter.
Deutsche Boerse chief executive Carsten Kengeter. PHOTO: BLOOMBERG

FRANKFURT (REUTERS) - Deutsche Boerse, Europe's largest exchanges operator, is postponing the launch of its Singapore-based derivatives exchange by about 18 months amid concerns about its technology and market turbulence in China, said three people familiar with the plans.

The German exchange operator had said in June that its Eurex Asia derivatives exchange and clearing house would begin operations in the second quarter of 2016. Singapore was intended to be the beachhead for an extensive plan to link up with many of the region's other derivatives markets, the Financial Times said.

Problems with the exchange's C7 clearing software were one reason for the delay, one of the people said. "It's still not working smoothly in some tests," the person said.

Deutsche Boerse chief executive Carsten Kengeter has been reviewing growth priorities since taking the helm in June. His predecessor, Reto Francioni, set the course firmly for expansion in Asia as crucial to the exchange operator's success in the coming years.

While Mr Kengeter, who has worked in Asia and speaks some Chinese, is still committed to the region, his most significant moves so far have been in Europe, with the takeover of foreign exchange trading platform 360T and buyouts of equity index joint ventures Stoxx and Indexium from Switzerland's Six Group.

Although many US and European exchanges have expressed a desire to expand in Asia, they have struggled to do so through the traditional cash equities trading route, due to long-entrenched rules and traditions that closely protect domestic exchanges in the Asia region from both takeovers and direct competition.

Bourses such as NYSE Euronext, Nasdaq OMX, London Stock Exchange Group, CME Group and Deutsche Boerse have instead opted for partnerships that largely involve cross-listing futures products, selling technology such as matching engines, or licensing products, like indexes.

A Deutsche Boerse spokesman broadly confirmed the delay to Eurex Asia to 2017 due to "internal and external" reasons but declined to give details.

"The scope and objective of the project remain unchanged; the significant expansion of the Asia business is an important element of our corporate strategy," the spokesman said.

Beside its plans for Eurex Asia, Deutsche Boerse announced earlier this year that it had agreed to set up a joint venture with Shanghai Stock Exchange and China Financial Future Exchange to develop and market Chinese shares, bonds and ETFs for investors outside mainland China. The Chinese exchanges declined to comment.

Many global exchanges had also hoped that rules in the wake of the global financial crisis requiring privately traded derivatives, such as interest rate swaps, to be pushed through clearing houses, would create opportunities in the region for exchanges experienced in this business.

But relatively low levels of such trades in Asia and delays to rules that would mandate clearing in regional markets has made this a difficult business to break into.