Here’s Singapore Exchange Limited’s Response to Competition from Hong Kong’s Stock Exchange

“If 2015 was the year of equity, 2016 is the year of derivatives, futures and options”

— Charles Li, chief executive for Hong Kong stock exchange

The comment above from Li may have stirred up an interesting question during Singapore Exchange Limited ’s (SGX: S68) earnings briefing.

Here, Li was commenting on Hong Kong stock exchange’s push to launch renminbi currency futures contracts against the Indonesian rupiah and Malaysian ringgit. His aforementioned comment hinted that there is more to come.

So what?

There’s a good reason why Li’s push into derivatives can be a concern for Singapore Exchange. The Singapore bourse operator’s business has benefitted greatly from its derivatives segment. Derivatives segment sales rose by nearly 20% in the first nine months of the fiscal year. The segment accounted for 40% of overall sales over the same period.

Loh Boon Chye, Singapore Exchange’s chief executive, responded the question of competition from the Hong Kong exchange during a recent webcast:

“Competition is not something we can ignore.”

“And if I refer back to our strategy of not just a country focus, but also a platform of vertical asset focus. So, our whole China suite has the currency, it has the iron ore, it has the the A50; we are going to add to it the MSCI China. And besides China, we have India with the other asset classes.”

“So, I think it will take a lot in terms of a multi-asset strategy to bring all this together. And I think competition increases the pool of users. And that should lead to better liquidity and overall volume increases for everyone.”   

Now what?

It might surprise investors to learn that Loh welcomes competition. It’s not something that Singapore Exchange is able to avoid. He believes that a larger pool of users benefits all players. In any case, it could still be early days for both Singapore Exchange and the Hong Kong stock exchange. We will have to watch for future developments.

To keep up to date on the latest financial and stock market news, sign up now for a FREE subscription to The Motley Fool's weekly investing newsletter, Take Stock Singapore. It will teach you how you can grow your wealth in the years ahead.

Also, like us on Facebook to follow our latest hot articles.

The Motley Fool's purpose is to help the world invest, better.

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.