FX: Spark looks to ignite Singapore’s high-volume user market
The man behind the company with plans to dominate Singapore’s high-volume user market in FX tells Euromoney how a higher percentage of local and regional liquidity can be kept within the island city state.
|Spark Systems management team: (from left) Wong Joo Seng, Jason Wang
Kee Huat, Ye Ting Song and Jason Lee Wing Hin
On May 28, the first client went live on the beta version of a trading platform developed by Spark Systems, which aims to better serve what founder and CEO Wong Joo Seng describes as an underserved buy side in Singapore.
Having spent the past three months testing and adding functionality, the platform was fully opened to the market on July 3 with two more clients in the integration phase.
The objective of Spark Systems is to build private platforms for high-volume users of FX markets, offering low-latency and low-cost access to hedge funds, central banks, sovereign wealth funds, retail banks and large corporate treasuries.
Singapore is home to 8% of the world’s FX trading. However, Integral CEO Harpal Sandhu observes that Tokyo remains the primary location for yen, and most other emerging market currencies are still traded in New York and London.
He suggests that this situation is unlikely to change until local customer liquidity remains in Singapore and regional liquidity migrates there, which will only happen if there is a compelling reason for customers to move.
Wong Joo Seng,
Wong is confident he can compete on cost against larger, better-resourced trading venues, which he says are often labouring under high legacy costs.
“We expect our initial institutional business to come from locally based clients – there is no reason to go offshore when there are so many onshore clients we haven’t served yet,” he says.
“In the mid to long term, we do not have a geographical or national target. Our market is international and we will serve our clients wherever they are based.”
There is substantial FX experience among the company’s senior management team. Wong was previously in charge of the currency options desk at Bank of New Zealand before founding GK Goh Financial Services, which became one of the largest institutional FX trading houses in Asia.
Chief technology officer Ye Ting Song managed a $1 billion quantitative FX macro fund at Pine River Capital Management in Hong Kong and was an FX algorithmic trading strategist at JPMorgan with responsibility for developing the electronic pricing of Asian and non-deliverable forward currencies on the bank’s e-commerce FX platform.
Jason Wang Kee Huat, chief operations officer, is a former head of FX sales at FlexTrade and vice-president sales for Hotspot FX at Knight Capital Group.
And Jason Lee Wing Hin, who was the senior vice-president for FX solutions at FlexTrade before his move to Spark, is tasked to manage day-to-day operations in areas of infrastructure and quality assurance.
The long-term objective is to move the epicentre of Asian FX trading towards Singapore, in the process improving latency by more than 100 fold – from 200 milliseconds for orders routed to New York or London to approximately two milliseconds for orders matched in Singapore.
“This will enable our platforms to achieve unparalleled low latency and reliability, especially when markets are under duress,” says Wong.
“There is tremendous potential for growth in FX volumes in Singapore, as it is already the third-largest FX trading centre in the world.”
He adds: “We also hope to help cultivate emerging market FX, which is a growing market with huge potential. In order for this to happen, we need to grow a valuable ecosystem of buy-side users that is attractive to sell-side participants.”
Wong accepts that Singapore does not yet have sufficient infrastructure to support high-speed FX trading, but suggests this is due to a combination of inertia and a lack of strategy on behalf of the global top 20 FX banks.
“To build infrastructure in Singapore, one needs to give these banks a reason for doing so that goes beyond funding,” he says. “Cultivating a valuable base of clients here is the best strategy for catalyzing this.”
Spark Systems is part owned by investment manager Dymon Asia Capital and raised $6.5 million from investors, including Singapore-based Vickers Venture Partners. It has also received support in the form of a grant for an undisclosed amount from the Monetary Authority of Singapore (MAS), which is keen to expand FX trading in the jurisdiction.
The Singapore government’s committee for future economy recently launched a report that identified the building of infrastructure for FX – as well as fixed income trading, commodities and equities – as a priority.
Jacqueline Loh, MAS deputy managing director for monetary policy and markets & investments, has previously confirmed that the central bank is working with the industry to further enhance price discovery, liquidity and transparency in the FX market by strengthening electronic trading capabilities and anchoring market infrastructure.
According to Wong, this is an eminently sensible strategy.
“Singapore is a major global centre for FX trading and yet it doesn’t have a marketplace,” he concludes. “All the marketplaces are based in London, New York and Tokyo, which means the substantial cluster of users based here are sending their transactions to these three centres for matching and execution, leading to inferior latency.
“There is more than enough volume generated in Singapore to justify having a marketplace here.”