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Keynote Address By Loh Boon Chye, CEO Of SGX, At The FIA Asia Derivatives Conference

Date 02/12/2020

Defining Asia’s Decade

Introduction

1. Good morning. First of all I wish to congratulate our friends at the FIA for putting together a strong calendar of virtual events throughout 2020 despite the immense challenges. You have brought together some 500 attendees for FIA Asia this week – very well done.

2. It is my pleasure to address delegates from around the world, as we come together to exchange ideas for the global derivatives space and discuss how the industry can continue to thrive, especially in the uncertain times that we are now in.

3.  As we approach the end of 2020, we take stock of a year to remember… volatility, virus, viral tweets – we have seen it all. Last December, when we were gathered at the St. Regis in downtown Singapore, debating the impact of the U.S.-China trade war, even the best crystal-ball gazers in the crowd could not have anticipated the change that was to come. But here we are today, having adapted the way we work and calibrated our tools to push on. A big credit to everyone.


4. It has been a month since the U.S. elections and we are starting to see a fair amount of expectation of a renewed commitment to multilateralism and international cooperation.

5. Indeed, there is a sense of optimism in the air. Recently we saw the signing of the Regional Comprehensive Economic Partnership or RCEP, after eight years of negotiations. It is the world’s biggest trade pact by far, covering 30% of global GDP, supported by China, South Korea, Australia and New Zealand and brings together all 10 ASEAN members including Singapore. It is poised to be an important contributor to our collective economic recovery.

6.As for the fight against COVID-19, there are positive news on at least two vaccine candidates. Could we be at an inflection point? Perhaps now we have an opportunity to reset and begin our new decade.

Asia’s leadership

7. Asia is in prime position to help shape what you might call a new normal. While COVID-19 had amplified a backlash against globalisation that was arguably underway years before the outbreak, we now know that even closer integration and cooperation is the only way to exit this crisis together.

8. We are already on the path to a new and improved form of globalisation, with a balanced Asian core. To be sure, even though U.S. and China lead the global economy today, let us not forget that there are more than 40 countries in Asia.

9. The region is large, complex and rapidly evolving. Asia is not only about China, or India, or emerging markets. Japan and South Korea remain a global force when it comes to world economics and political influence. ASEAN, comprising the 10 nations of Southeast Asia, is essentially the world’s fifth-largest economy. It is a market that is growing in population size, which few can ignore.

10. As much as we spend time deciphering the impact of the U.S.-China trade war, Asia is far more than just about competition between these two giants. Understanding the different trade flows, dynamics and nuances between Asian countries will become more important in a post-COVID, RCEP world.

Singapore: Heart of Asia

11. So where is Singapore in all of this? The city-state has always been the neutral node in this disparate yet interconnected region. We are best placed to play this central role. Geopolitical neutrality is our calling card.

12. At the height of the global market volatility in March, Singapore kept the financial marketplace humming along despite uncertainties on a historic scale. We kept our marketplaces open and accessible, without restrictions even when there were calls for intervention. With news flowing across time zones, we ensured that global investors could react to news with confidence and manage their portfolio risks efficiently. Almost a quarter of futures contracts traded on SGX changed hands during the overnight T+1 session, which shows the importance of round-the-clock access.

13. For SGX, our emphasis has always been on building trust and resilience. Singapore’s standing as a flight-to-quality, flight-to-safety venue has been built over decades – the Black Monday crash of 1987, the Asian financial crisis of 1997, the SARS outbreak in 2003, the 2008 global meltdown and now COVID-19. We do not take for granted our position as Asia’s only AAA-rated jurisdiction and work very hard to maintain it.

SGX: Deeply rooted derivatives market

14. The growth of SGX’s trusted derivatives platform reflects the growth journey of Singapore. We pioneered SIMEX, Asia’s first financial futures exchange, 30 years ago. Together with CME, we launched the Nikkei 225 futures, the world’s first Asian futures contract. We also successfully launched one of the earliest exchange linkage, a 24-hour trading system with CME, which is still widely used today three decades on. These were the initial steps to building a global marketplace for access to Asia, which continues today.

15. Why do I bring this up? Because our foundation as a globally connected marketplace, right in the heart of Asia, is deeply rooted and forms the core of our business. We remain focused on these core strengths, even as we are agile to meet our customers’ evolving needs.

16. What we have built over the years is an integrated ecosystem. The power of this ecosystem – comprising platform, clients and distribution – cannot be underestimated. A case in point is our SGX FTSE Taiwan index futures, which is among our most successful product launches, drawing on the support of our network. Adding to our index partner FTSE Russell, we decisively put into play the fastest build of liquidity of any contracts, achieving over US$6.8 billion in open interest and daily average turnover of almost US$4 billion in just four months.

17. And in a first for an exchange anywhere in the world, we facilitated a liquidity switch to the FTSE contract, moving US$1 billion of open interest effectively cost-free to our clients ahead of the U.S. presidential elections. This success is due to the deep and strong derivatives ecosystem that includes many of you joining today’s conference – an ecosystem of partnership, credibility and trust.

Focus on the Community and Sustainability

18. The challenges of our time require us to come together as a community, working towards a common objective. As we saw with the pandemic, you can choose to close borders and be safe, but you can never reopen with confidence until everyone is safe.

19. Indeed, beyond pandemics, the next reckoning is the environment, where there is a growing global awakening. Among the G7, the UK was the first to commit to net-zero greenhouse gas emissions by 2050, a very ambitious target, while President-Elect Joe Biden has pledged to put the U.S. back in the Paris Climate Accord on Day 1 of his presidency, which begins in seven weeks.

20. Asia, with its weight in the global economy today, can make a decisive impact. There is a clear shift in how governments approach climate and the environment. Singapore, for one, recognises that we have much at stake. We are one of few countries in the world to have introduced a broad-based carbon tax. The Monetary Authority of Singapore is working on a comprehensive, long-term strategy to make sustainable finance a defining feature of Singapore’s role as an international financial centre. Like many other Asian countries, China, too, has made climate change a priority, recognising that being sustainable can help it move up the value chain. China, Japan, South Korea and Singapore have made net-zero emissions pledges.

21. But ultimately, it is the way companies integrate sustainability into their businesses that will drive and accelerate change. While sustainability has been viewed by some as a short-term cost of doing business, it is now widely accepted to be aligned with long-term performance.

22. As FIA rightly highlighted in a policy paper several months ago, derivatives markets need to be part of the climate change solution and help build a more sustainable future. Although sustainability is gaining momentum in Asia, more needs to be done to accelerate awareness and adoption.

23. SGX continues to work towards this goal by bringing more sustainable investment and risk-management solutions to global investors. As one of the top five listing venues globally for sustainability bonds, we continue to engage our partners to make sustainability bonds more mainstream in Asia. Beyond that, we plan to work alongside our customers to develop more ESG solutions, including derivatives, and across asset classes, to help them meet their sustainability objectives.

24. While we know that many challenges such as standardisation remain, what COVID-19 has taught us is that when there is a will, there is a way. We must be innovative and drive change as a community. Together, we can create real impact. Only then can we look back at this moment as Asia’s opportunity to define the decade.

25. Thank you.