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Singapore staves off threats to its FX crown

Singapore is steadily fending off threats to its position as Asia’s largest FX trading centre, threats that include liquidity concerns, growing volumes in Hong Kong and the rise of Shanghai.

Last year’s Bank of International Settlements data on global FX trading made pleasant reading for Singapore, showing that the island state had grown its market share by 30% from in 2015.

However, research firm Investment Trends highlights the complexity of the country’s retail market in its 2016 ‘Singapore CFD and FX report’. It found that an estimated 22,300 individuals placed at least one FX trade last year — down from 24,500 in 2015, with almost half of all previously active traders not placing a single trade during 2016 — yet the number of new brokers increased over the same period.

Despite one in seven traders placing a trade through a new market entrant last year, the report also found that just 7% had switched broker. Of the eight markets covered by Investment Trends, Singapore now has the lowest level of attrition due to switching.

Further growth will be seen in the corporate space as incentives for regional treasury centres kick in and they begin to set up hubs in Singapore, suggests Michael Go, head of FX market development for Asia Pacific at Thomson Reuters.

Buy-side electronification

Most buy-side players are already electronic market participants — a market segment that will grow further, Go adds: “FX growth in Singapore will be further strengthened if it continues to support the Asian headquarters for mega banks, global institutional investors and multinational companies, as well as the leading private wealth management firms in Asia.”

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