CFD fever hits Singapore

Peter Oxlade, senior vice president and head of CFDs & Securities for Man Financial, is under no illusions: establishing a viable presence in Singapore’s fledgling CFD market – and the wider Asian region – will be no walk in park. But he’s convinced, after slightly less than a year in Singapore, it’s a walk a select group of CFD providers will successfully take.

The CFD market in Singapore is where Australia was about three to four years ago, notes Oxlade. “It’s not a mainstream product in Singapore yet. It really is a matter of getting out there and doing some seminars to reach the people that will happily trade this sort of product.”

With the Australian Stock Exchange declaring CFDs the fastest growing financial product in recent years – it will be a challenge to replicate similar growth rates in Singapore and throughout the region.

“We certainly believe that market exists; we’re seeing an appetite already,” says Oxlade. [Man Financial released its product in early March.] “It’s not huge at this stage, but we can see it starting to grow; certainly there’s more noise about this product in the press. It’s following the same sort of pattern we saw in Australia where it gathered a bit of momentum and then just took off.”

What helps fuel Oxlade’s optimism is Singapore’s strong trading culture. “Yes, I think that exists in all Chinese communities. People in this part of the world understand trading and are relatively active so, yes, we do want to tap into that.” David Grant, head of Asia Pacific for City Index, concurs. “You’re right. There’s a strong trading culture in Singapore.” [City Index began trading in September 2005.] But he’s quick to add, in the same vein as Oxlade, that it’s still early days, and that the market isn’t as advanced as Europe or Australia.

That said a bullish attitude about the potential for CFD trading in Singapore and the wider Asian region is not limited to Man Financial or City Index; IG Markets, CMC Markets and Saxo Bank are other CFD brokers that have hung out their shingle in the Lion City. Local firms, such as Phillip Securities and Lim & Tan Securities, are also in the market; in the case of the former, however, its product differs slightly from the traditional CFD.

The fact Singapore has become the first port of call for traders in CFDs is not surprising; the Monetary Authority of Singapore (MAS) has laid out the red carpet to foreign firms, as Grant explains. “The MAS’s regulatory framework made it an obvious choice for us. [In Hong Kong, CFDs currently can’t be offered to the retail market.]

“The regulator is very forward thinking, and is quite receptive to new products and ideas. We’ve established a very good working relationship with the MAS in that regard. More generally, the Government is very receptive to foreign firms investing in Singapore; they’re offering every encouragement. I think it’s testament to how successful that policy has been is the extent to which other investment banks are looking at Singapore as their regional hub.”

In addition to being a regional hub and having the regulator onside, Singapore offers all the advantages of having a well-educated multicultural and multilingual society. Grant says: “In terms of servicing the rest of South-East Asia, clearly Singapore is well situated. We are also able to source local talent compared with Malaysia, for example, where the skill set is much narrower. In any way you want to look at it – workforce, regulation, living and working environment – there’s been no major hurdles to setting up here.”

Oxlade says Man Financial considered running its Asian operation out of Australia. “We looked it but decided that to actually launch a successful Asian product we needed a base in Asia. There’s no choice really. You have to be on the ground and be able to get around to Hong Kong, to Japan, to Malaysia, in a couple of hours rather than travelling from Sydney. It just made more sense for us to be in Singapore.”

For Man Financial and all its competitors, Singapore is the springboard for the Asian offensive. In some jurisdictions, regulatory change is required. In all markets, an education process to create an understanding and interest in CFDs will be critical.

Oxlade says: “Singapore and Japan have recognised the product and we can offer it now to retail traders there. It’s yet to be classified in Malaysia and Indonesia. In Hong Kong, South Korea and Taiwan, we’re waiting on regulatory change. But whatever the state of play in the different Asian countries, we think there’s enormous potential throughout the region.

“Certainly we think Japan’s going to be a huge market. There’s an appetite for leverage in Japan and there is, from what we can see from our early investigations, a pretty strong appetite for leverage in Taiwan and Korea. So once we get the green light from the regulators, we’ll be in all those markets.”