Singapore Exchange Picks TradingScreen to Build OTC Asian Bonds Trading Platform

Since the dawn of the global financial crisis, Asian companies have increased their use of bonds to cover their funding needs and added to existing channels such as bank borrowing. The booming issuance, which has increased the market by more than 400% since 2008, has benefited from favorable liquidity conditions.

After recently announcing their first over-the-counter (OTC) liquidity venue dedicated to Asian Bonds (“SGX BT”), the Singapore Exchange (SGX) has picked TradingScreen to build its platform. TradingScreen has already been supplying its technology in Europe where it operates the Galaxy bond trading platform as a Multilateral Trading Facility (MTF).

While the bond markets of Hong Kong, Singapore and Korea are comparatively advanced and liquid, markets in China, India, Indonesia and Thailand are still at an early stage of development. The Singapore Exchange is aiming to add a new platform in order to boost its offering.

Largest Asian Corporate Bonds Markets, Source: Deutsche Bank Research

According to Deutsche Bank’s Research, “While fast growth in bond markets has provided an effective source of financing for the corporate sector, its development is far from complete. Corporate leverage and indebtedness have risen throughout the region, notably in China.”

“There is a structural imperative underpinning growth in corporate bond markets. Long-term projects increasingly require funding from the non-public sector, given the region’s demographic challenges, emerging middle classes and substantial needs in infrastructure and urban development, which cannot all be met via fiscal spending only,” the report concludes.

Institutional Investors Assets, % of GDP, Source: Deutsche Bank Research

The amount of assets at institutional investors’ disposal in Singapore surpasses 100% of GDP and, in these terms, Singapore is the leader in the Asian market.

The rapid development of the Asian bond market is now prompting an organized and efficient secondary market (OTC). However, meanwhile, increasing regulatory and capital adequacy requirements make it harder for the traditional secondary-market liquidity providers to meet the demand.

As a result, the market is searching for alternatives that could alleviate the liquidity and intermediation needs that have arisen. With the new technology, traders will be able to take advantage of a comprehensive Asian bond trading service.

TradingScreen’s CEO, Philippe Buhannic, shared in the company announcement, “We are very pleased to be working with SGX, to launch a bond trading platform that will both respond to the current liquidity challenge and provide customers with additional choices and increased trading efficiency.  We are looking forward to the development of the Asian bond market as one of the most important opportunities for the Buy Side community among the new tradable assets.”

The President of the SGX added, “We were keen to invest in technology that would equip the region with a versatile platform addressing the peculiarities of bond trading within the Asian markets.  TradingScreen as our technology platform provider will help us achieve this and will allow us to adapt to clients’ needs in the coming years while providing the best trading service for bonds in Asia.”

The SGX signed a long-term contract with TradingScreen and pledged to continue working with the industry to deliver full end-to-end automation and to optimize the bonds trading experience for its clients.

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