Singapore Exchange (SGX) has successfully completed the first USD/CNH Flexible FX futures trade.
The transaction involved Bank of China (Singapore) and ICBC (Singapore) executing two CNH FlexC FX futurised swap trades on SGX. A total notional value of $8 million changed hands.
“The transaction marks a major step forward in bringing together the listed and OTC markets in FX. With global regulatory initiatives such as Basel III and MIFID II coming into play, financial institutions are facing an increasing burden of capital requirements that include Leverage Ratio, Liquidity Coverage Ratio and Counterparty Credit Risk charges, as well as Uncleared Margin Rules (UMR) for OTC derivatives. SGX FlexC Futures offer an effective solution to maximise capital and operational efficiencies, reduce costs and counterparty credit risk, while retaining bilateral trading relationships,” says the exchange operator in a release issued today.
Profit & Loss has reported extensively on the FlexC futures contracts, which are designed to enable firms to bilaterally negotiate trades with tailored expiration dates and then register and clear these trades like a normal futures contract. The actual trade agreement can occur via a CLOB, RFQ, RFS, or even over the phone, and then once agreed, it is executed and cleared via SGX.
The essential aim behind FlexC FX futures is to provide all the flexibility of an OTC trade with the benefits of trading and clearing via an exchange.
SGX FlexC FX futures are available for INR/USD, KRW/USD, TWD/USD, USD/CNH and USD/SGD contracts.