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SGX announces collaboration with KRX on OTC clearing

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Modern Money

Singapore Exchange and Korea Exchange have decided to collaborate in an effort to develop over-the-counter financial derivatives clearing capabilities. SGX, which has been clearing OTC financial derivatives since late 2010, has cleared close to $300 billion notional of OTC financial derivatives including interest rate swaps and non-deliverable Asian foreign exchange forwards. Meanwhile, KRX plans to begin clearing OTC derivatives in the middle of 2013 as part of an effort to attract a more global client base.

Speaking on the sidelines of the 38th Annual International Futures Industry Conference, SGX Chief Executive Officer Magnus Bocker shared his view on the importance of clearing. “If you look into 2013 and even 2014, one of the big changes to our industry is clearing. Where the clearing will take place. … Who has the resources to put money to work in that area.”

“This collaboration will explore possible synergies to better meet the needs of market participants, particularly in the Singapore and Korea markets. International awareness of Korea and Singapore OTC derivatives markets will grow, thereby helping us to increase participation levels,” said KRX President and COO Ho-Chul Lee.

SGX President Muthukrishnan Ramaswami believes central clearing is vital for OTC market participants and represents an essential building block for SGX’s business. However, Ramaswami doesn’t expect OTC clearing to be very profitable in and of itself. “Clearing will be a facilitator to build contracts that are highly liquid and highly traded,” Ramaswami said.