Singapore Exchange Limited (SGX) offers investors new equity product – Extended Settlement (ES) contracts scheduled to begin on 23 January 2009.
The service allows investors to buy into an underlying stock listed on SGX at the transacted price on the day of the trade, for settlement at a specified future date.
The clients will get following benefits from ES contracts:
– ES contracts enable more efficient margin-based trading. This provides better risk management for the industry and increased capital efficiency for long investors, which are especially relevant in volatile markets.
– Exchange-traded and -cleared ES contracts facilitate orderly andtransparent trading of forwards/futures needs and reflect the views ofinvestors. Specifically, all short positions in ES contracts will bematched against equivalent long positions and open interest will betransparent and published. Both long and short positions are marginedand marked-to-market for system integrity.
– With the participation of liquidity providers SGX will facilitate increased liquidity in the cash market for underlying securities which are impacted, thusbenefiting all investors in the marketplace.
Among various activities, participating brokers will be organising product education seminars in collaboration with SGX at venues such as the SGX auditorium in Shenton Way.
The 10 stockbroking companies supporting the development and launch ofExtended Settlement contracts are AmFraser Securities, CIMB-GK Securities, DBS Vickers Securities, DMG & Partners Securities, Kim Eng Securities, Lim & Tan Securities, OCBC Securities, Phillip Securities, UOB Kay Hian and Westcomb Securities.
Extended Settlement contracts will be the first margin-based product in our securities trading market, says Chew Sutat, executive vice president and head of Market Development, SGX. The launch of ES contracts on SGX’s securities platform will fill the current pressing need in the equity derivatives space for Singapore-based retail investors.
The Securities Association of Singapore is pleased to have had the opportunity to work closely with SGX, and at many levels, to develop Extended Settlement contracts as a new product and to get the trading infrastructure ready for the launch, says Lim Eng Hai, chief executive officer, the Securities Association, Singapore. All 10 local brokers welcome the opportunity to play a key role in training and preparing the professionals and informing and educating the investing public on how this new product can serve them well.
L.D.