BNY Mellon, Deutsche join global firms to base pricing/matching engines in Singapore for FX/Treasury

Singapore has attracted key liquidity providers and platforms to base their pricing and matching engines, which include seven banks and market makers that have moved these activities to Singapore. Now, another two global banks are joining: BNY Mellon and Deutsche Bank. The existing seven are Citibank, Standard Chartered Bank, UBS, JP Morgan, BNP Paribas, XTX, and Jump Trading. So even during this period, we are seeing positive, encouraging developments on the FX front, according to Ravi Menon, managing director of the Monetary Authority of Singapore, at a recent conference.

FX and treasury has been one of the better performing segments in the financial industry. Singapore’s FX market has been resilient – it was able to manage the volatility from the global impact of COVID-19. FX trading volumes in March hit a record high because people were hedging, offloading, and readjusting their investment positions. Activity has now come down to a more normal level. Spreads have widened. This is to be expected in times like these. But spreads have not widened unduly. There is sufficient liquidity in the system.

Having a robust infrastructure in place to support swings in trading activities has been important. Especially useful was the electronic trading infrastructure for FX, which MAS has been working with industry on for the last few years. We want the pricing and matching engines to be based here, and not have to wait for prices to be matched in London, New York, or Tokyo, because there is still a time lag taken to route orders to these markets. Sometimes there are execution errors with these lags, especially during periods of trading volatility.

The financial sector has been quite remarkably resilient in the face of Covid-19. All financial services have remained open, except those involving face-to-face interactions with customers outside of bank branches. During the circuit breaker period, 85% of workers in the financial industry have been able to work from home. MAS (Monetary Authority of Singapore, the central bank) itself is close to 90% of staff working from home.

If our financial sector had not made these investments – imagine if there was no retail electronic payment system, or if there were no infrastructure for digital banking or selling insurance online or trading from home – we would be in a much worse situation today.

Many financial institutions have had to make significant adjustments to the new environment. The growth rate of the financial sector, while stellar in Q1, will be much slower through the rest of the year, because underlying economic activity will be weak. But in terms of being able to function and operate amid the circuit breaker, the financial sector’s performance has been quite heartening.

Menon also discussed new opportunities such as digitalization, impact investing and pandemic risk insurance.

Read the edited transcripts

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