ICE Futures Singapore Aims to Expand
Trading began on ICE Futures Singapore in 2015 but the exchange has just launched its first contract that is only listed on Intercontinental Exchange’s venue in Asia.
The exchange launched Micro Asia Tech 30 Index contracts on ICE Futures Singapore in April this year.
Lucas Schmeddes, president and chief operating officer of ICE Futures Singapore & ICE Clear Singapore, told Markets Media that ICE Singapore is a relatively young exchange and clearing house that started operating in 2015.
“Initially we offered ICE’s existing products and global benchmarks to launch and grow the ecosystem,” he added. “We have now reached a size and stage of maturity where we can come out with our own unique product which is only listed in Singapore.”
Schmeddes was previously chief operating officer of ICE Endex, ICE’s continental European energy exchange. He continued that the ecosystem now has sufficient liquidity, trading volumes, number of participants, retail brokers and brokers that can help distribute ICE products into the Asia-Pacific region.
“I would expect that over the next 12 months we will launch more products that are relevant and meet the needs of the market participants, “ he said.
The new futures contracts are based on ICE’s recently launched Asia Tech 30 Index. The ICEAT30 index includes the 30 largest technology and tech-related companies listed on selected Asia-Pacific exchanges.
“Quite a few firms bringing us the next generation of technology are headquartered in Asia and are gaining prominence,” said Schmeddes. “So we thought an index product reflecting that underlying trend had great appeal.”
The index has returned an annualized gross total return of approximately 13.8% from its base date of March 19, 2010 to April 9, 2021 according to ICE.
Schmeddes continued that the ICE Asia Tech 30 Index is different as it focuses on a comprehensive definition of technology, including firms that are listed on Asian exchanges and traded in the Asian timezone. The index contains both traditional technology stocks, such as consumer discretionary products, media, communications; and next generation tech companies operating in online retail, gaming and social media and is denominated in US dollars.
“The basket of 30 stocks also provides a good balance between blue-chip companies as well as e-commerce platforms and is rebalanced on a quarterly basis because this is a dynamic sector,” Schmeddes added.
Each Micro Asia Tech 30 Index futures contract is micro-sized at around $10,000. Schmeddes explained that the futures contract is micro-sized to allow broader accessibility and a more granular means of obtaining or laying off exposure.
“Trading futures referencing the index helps investors overcome the hurdles of accessing each individual country, sourcing local currency and managing exposures,” he said.
The new contracts will trade alongside other contracts listed on ICE Futures Singapore which include Bitcoin futures, as well as cash-settled Mini Brent Crude, Mini US Dollar Index, Mini US Dollar/Offshore Renminbi, and Mini US Dollar/Singapore Dollar futures.
“A market is only a market if people are able to find each other,” added Schmeddes. “Once it has a certain traction it becomes like a flywheel that starts spinning and attracts others.”
ICE Singapore launched Bitcoin futures in 2019 and Schmeddes said there is liquidity throughout the day. He continued that although the cryptocurrency market is global, a lot of trading activity originates from Asia and is during Asian hours, and ICE felt it had a role to play to help develop this market and provide institutional grade infrastructure.
“More institutional interest is coming into cryptocurrency,” he added. “We want to be positioned for that and play a role in making sure we unlock the market’s potential.”
ICE operates a model of different exchanges in different jurisdictions because trade is global according to Schmeddes. In Asia Pacific it faces competition from local exchanges such as Singapore Exchange (SGX).
Schmeddes said: “In Singapore our role is to provide a platform where the region can meet the international trading firms. We believe we can unlock trading opportunities for both regional participants and global firms by connecting them on our exchange and clearing platforms.”
Ben Jackson, president of ICE, said on the exchange’s results call that natural gas continues to globalize, a trend that ICE began investing in nearly a decade ago through the acquisition of Endex.
“Our European TTF and Asian JKM gas complexes continue to grow and reach important milestones as they evolve into global gas benchmarks,” Jackson added. “In the first quarter, the number of participants in each market grew double digits year-over-year and TTF Futures reached record volumes.”
He continued that in the first quarter multiple ETF sponsors switched their benchmark provider to ICE data indices and there was also growth the use of its custom index solutions across the US, Europe and Asia Pacific.
In the first quarter the exchange also launched ICE Futures Abu Dhabi (IFAD) which started trading the first Murban Crude Oil futures. Alongside ICE Murban Crude Oil futures, IFAD launched trading in 18 Murban-related cash settled derivatives and inter-commodity spreads.
In the first month, Murban, along with related derivatives, traded over 150,000 contracts across 49 firms with growing open interest over 45,000 lots which made it one of the most successful futures launches in history according to Jackson. He said ICE had stayed very close to the commercial customer base since inception.
“That’s what’s enabled us to develop literally hundreds of oil contracts around the world, because it helps our customers not only manage their risk in a benchmark contract, but also help them manage their risk at the point of consumption or the point of production of where they have real risk,” Jackson added. “We’re the only truly global platform that enables customers with deep liquid markets in hundreds of marketplaces to be able to manage that risk. “
Jeff Sprecher, chairman and chief executive of ICE added on the results call that there is a large Asian presence of commercial users that operate in and around the Middle East.
“So it gives us an interesting launch point for additional derivative contracts,” Sprecher added.