Singapore Exchange’s global strategy – world’s fastest trading system

Singapore Exchange Ltd (www.sgx.com) is planning to install what it says will be the world’s fastest trading system, reports the Wall Street Journal. The move comes as competition gets hotter among Asian exchanges for a bigger share of large investment sums being sent East.
The $195 million SGX Reach project aims to bring Asia a fast electronic trading platform similar to those in Europe and US. The paper reports that lack of competition and regulatory barriers had prevented Asia exchanges following the race for speed dominance of the US and European exchanges.
SGX, which also clears all trades, says the new system will reduce costs for customers and enable them to trade fast, with response time of 90 microseconds and the capacity to handle 1 million changes to the order book every second. The London Stock Exchange Group PLC’s Turquoise platform is currently the fastest in the world and has an average response time of 126 ms, according to figures from the LSE.

SGX global strategy

SGX’s bold strategy to raise its global profile includes pursuing an $8.4 bn deal to acquire the Australian stock exchange ASX Ltd. This would give the combined exchange more commodity trading, an area where Hong Kong stock exchange has also expanded.
Magnus Böcker, SGX Chief Executive, said in a statement that SGX Reach “will help Singapore leap ahead of other global markets as a centre for international fund-raising and investment”. He was previously the President of NASDAQ OMX Group.
Last week (18 Jan) it announced that it would eliminate the 90-minute lunch period to give more trading time.
The same day Hutchison Whampoa Ltd made an initial public offer on SGX for its ports business which aims to raise up to $6 billion. China-based companies don’t often bring IPOs to Singapore.
Also that day SGX reported 14% rise in second quarter net profit, mostly due to more trading volumes from major companies capital raisings.
In October 2010 it got approval for a joint venture with Chi-X Global Inc to become a market operator for an Asian-Pacific alternative trading platform, or “dark pool” (see previous blog story), where managers can trade large blocks of shares anonymously.
Also in October, trading began in American depositary receipts (ADRs) of 19 major Asian companies.

Regional competitors

Hong Kong Exchanges & Clearing (www.hkex.com.hk) was the top market worldwide for IPOs in 2010, raising $53,2 bn, according to Dealogic, while SGX was 16th, raising $6 bn. HKEx is the leader in China-related IPOs and it is reported that a Japanese company is seeking to sell shares there for the first time, and Chinese companies are busy raising another $2 bn. It also plans to extend the current 4-hour trading session to 5 hours a day from March and to 5.5 hours a day from March 2012. It aims to increase trading capacity tenfold at the end of 2011 by technology to handle 30,000 orders per second (scaleable to 150,000 orders per second if necessary) with average order response time of 9 milliseconds.
Tokyo Stock Exchange (www.tse.or.jp/english) is considering extending trading time by cutting 30 minutes off the lunch break, with a decision expected by early February. It is in process of replacing its trading system and is combining its futures and options trading in a new platform that will cut trading time by a multiple of 10.

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