MonFX gets MAS licence to offer forex derivatives contracts

Commercial foreign exchange (forex) services firm MonFX yesterday obtained a Capital Markets Services (CMS) licence from the Monetary Authority of Singapore (MAS), less than a year after commencing applications, said its chief executive Alvin Lai.

This will allow it to offer over-the-counter forex derivatives contracts to accredited or institutional investors, enabling them to trade derivatives to hedge their forex risks.

MonFX is part of Britain-headquartered corporate forex specialist Monex Group, and has operated in Singapore since 2018.

Its Singapore office is the first in Asia, and the firm already holds an MAS Major Payment Institution licence, which enables it to provide forex and cross-border money transfer services from Singapore.

Western Union Business Solutions is one other company that holds both licences here.

MonFX's dual licence status will enable it to "work with clients to structure solutions to manage their forex risks" at a time of heightened market volatility given the uncertainty of the Omicron Covid-19 variant and its impact on the global economy, Mr Lai said.

It also comes amid diverging central bank strategies in the execution of monetary policy. "This week alone, central banks will be holding numerous policy meetings. Every country has a different view on monetary policy and currencies globally will swing in different ways," Mr Lai noted.

He added that having the tools to protect their bottom lines against expected forex volatility is "critical for businesses, as an increase in forex rates when making payments to suppliers, for example, can wipe out a company's entire profit margin".

The Turkish lira, for instance, has lost around half its value against the US dollar this year, he said.

Forex derivatives contracts include products such as forward contracts that allow businesses to lock in their forex rates in advance. "Such contracts are attractive to our customers as it gives them certainty and transparency, and protects against downside risks," Mr Lai said.

The company now expects to scale up its business here in terms of volume and headcount over the next three to five years.

"We expect to increase our headcount to 30 to 40 over the period from 10 currently," Mr Lai said.

At those levels, the Singapore office will be similar to the Amsterdam and Canada offices. "We see a lot more upside in Singapore for this business."