SGX in talks with Chinese regulator on plans to launch China equity-index options

SINGAPORE (Bloomberg) - Singapore Exchange (SGX) plans to start trading Chinese equity-index options as investors seek ways to hedge risks in the world's most volatile stock market.

SGX is in talks with the China Securities Regulatory Commission on when the Singapore bourse can introduce options on the FTSE China A50 Index, with approval likely to come after such products are introduced on the mainland, President Muthukrishnan Ramaswami said in a Bloomberg TV interview on Thursday (Jan 22). Volume on China A50 futures traded in Singapore surged 183 per cent in the three months ended Dec. 31.

"We're awaiting CSRC guidance on when they are ready to let options trade overseas," said Ramaswami. "We are not in a great rush. The futures have some room to grow and options does provide a second stage of growth."

The Singapore bourse yesterday reported its first quarterly profit growth since 2013 as it benefits from efforts to attract investors across a broader range of asset classes, while appetite for trading shares in the city-state stagnates. Derivatives accounted for 39 per cent of revenue in the quarter, up from 32 percent a year earlier.

"Our efforts today are really to expand beyond just equity futures into things like options and other contracts that will help you cover similar exposures," Ramaswami said. "The second focus we have is on similar FX futures contracts for the same markets."

A gauge of 30-day volatility on the Shanghai Composite Index rose to 42.3 on Jan. 19, the highest among the 15 biggest global benchmark indexes tracked by Bloomberg and up from its decade-low 9.4 in July.

The CSRC has approved trading of Shanghai Stock Exchange 50 A-Share Index exchange-traded fund options from Feb. 9, Shanghai Securities News reported Jan. 9, citing a weekly briefing by the securities regulator.