The Singapore Exchange (SGX) will offer foreign exchange (forex) futures on a trading platform it recently invested in.
It said yesterday that it has acquired a 20 per cent stake in BidFX for US$25 million (S$34 million) in cash with the option to buy additional shares to gain a controlling interest.
SGX chief executive Loh Boon Chye told a briefing that the purchase is part of the bourse operator's growth strategy across different asset classes.
"With this investment, we have an opportunity to offer our suite of Asian (forex) futures alongside the over-the-counter products offered on the BidFX platform, bringing together both pools of liquidity," he noted.
BidFX CEO Jean-Philippe Male said the capital investment will allow the company to "deliver comprehensive (forex) trading coverage to market participants in one workflow management system".
BidFX operates in Singapore, London and New York. Mr Male said the SGX investment will allow BidFX to expand to Sydney, Tokyo and Hong Kong, among other cities.
He added that BidFX allows its customers, including hedge funds, asset managers and banks, to "trade any currency pairs... in any negotiation protocol".
BidFX trades mainly in Asian and G10 currencies such as the euro, the greenback and the Japanese yen, and is a subsidiary of SGX partner TradingScreen, which provides electronic trading solutions.
TradingScreen CEO Pierre Schroeder said: "We are very excited... to have secured SGX as an investor", adding that the investment will boost BidFX's growth momentum.
SGX's involvement will also "add credibility to BidFX as a company and to its business", he added.
"We've been incubating BidFX inside TradingScreen... This investment strengthens BidFX's leadership status across the global financial markets ecosystem."
CMC Markets analyst Margaret Yang called SGX's investment in BidFX "adventurous and smart".
It is also a reasonable move given that more companies are delisting and there are fewer initial public offerings, she added.
She said: "Derivatives and forex trading have helped underpin weakness in the cash markets", pointing out that the forex trading volume is "bigger than any asset class".
Investors are also drawn to forex trading because the process is relatively more transparent, she added. "There's no information bias, no information asymmetry."
The SGX's forex futures had an average daily turnover volume of US$4.4 billion as of last month.
