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SGX clears first Asian FX forwards

The Singapore Exchange has launched its clearing service for over-the-counter traded Asian non-deliverable forwards (NDFs).

Deutsche Bank, DBS Bank and OCBC Bank cleared their first contracts on the exchange on Monday, the company said in a statement. Although NDFs are not yet obligated for clearing in Asia, the initiative – which is the first of its kind – is in preparation for impending US and European regulation that would require OTC derivatives, including NDFs, and possibly other FX products to be cleared via a central counterparty to reduce systemic risk in financial markets.

The move to clear NDFs comes a year after the exchange first launched clearing services for interest rate swaps, in November 2010. SGX’s FX clearing service covers non-deliverable Asian currencies, namely the Chinese yuan, Indian rupee, Korean won, Indonesian rupiah, Malaysian ringgit, Philippine peso and Taiwanese dollar.

The 11 SGX clearing members eligible to clear FX forwards are Barclays Bank, Citibank, Credit Suisse, DBS Bank, Deutsche Bank, HSBC, Overseas-Chinese Banking Corporation, Standard Chartered, The Royal Bank of Scotland, UBS and United Overseas Bank.

SGX says it expects membership to grow in the months to come, with interest from all banks active in these products.

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