Deutsche Börse will establish a clearinghouse in Singapore as part of a plan to double its net revenues in the next four years.
Chief executive Reto Francioni said the group is “in the process” of establishing the clearinghouse in consultation with the local supervisory authorities and its global customers. “We expect this to have high strategic development potential,” he said. “Our objective is to provide long-term client-oriented products and a robust infrastructure across the entire Asian time zone from this base and thus to contribute to the systemic stability of the region’s capital markets.”
The clearinghouse will be a 100%-owned subsidiary of Deutsche Börse Group and will take on the likes of IntercontinentalExchange (ICE) Group, which earlier this month acquired the Singapore Mercantile Exchange (SMX).
On Tuesday, Deutsche Börse reported 2013 revenues of €1.9 billion. Clearstream is was the largest contributor to those revenues, with 20% of its ICSD business coming from Asia. The ICSD has signed a letter of intent with the Singapore Exchange (SGX) to develop a solution for collateral management, which can be expanded to other markets in the region. It has a similar agreement with the Australian Stock Exchange.
Singapore will be the focal point of Deutsche Börse’s Asian activities. The group turned its attention to the region after the European Commission rejected its bid for NSYE Euronext in 2012. Deutsche Börse currently has several partnerships in the region and it plans to offer daily futures based on the Taiwanese main exchange index, TAIFEX. It also offers daily futures on the Korean stock exchange and provides trading technology to the Bombay Stock Exchange (BSE). The German exchange also has a technology partnership with SGX, which has licensed the Eurostoxx 50 in U.S. Dollars.
“In addition to the growth in OTC and unsecured markets, we’re going to further strengthen our business in growth regions – with a focus on Asia,” Francioni said. “We clearly enjoy a very good reputation in Asia and have been able to expand our relationships considerably since the start of our Asian initiative last year.
“Singapore seems ideally suited to this role due to its strategically advantageous position as well as the geographic and cultural links it offers – to both South and East
Asia. It also has a stable political and legal situation and a well developed, internationally open capital market structure.”
Commenting on growth projects in 2013, Francioni said the macroeconomic environment in Europe last year was extremely difficult for our business; the low-interest rate policy of the European Central Bank marginalized the net interest income of our subsidiary Clearstream. It also meant that market mechanisms had no effect on pricing in many markets and left market participants with less incentive overall to request further post-trade services and liquidity management offerings.
In addition to further expansion in Asia, Deutsche Börse’s strategy is based on exploiting structural growth opportunities in clearing OTC derivatives and collateral and liquidity management.
German Stock Exchange Plans Singapore Clearinghouse
Deutsche Börse will establish a clearinghouse in Singapore as part of a plan to double its net revenues in the next four years.