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The STI is owned and published by Singapore Press Holding Limited (SPH), who has granted to SPHDS, its wholly owned subsidiary, the right to license the use of the STI to third parties. The STI is a market capitalisation-weighted index of 55 stocks listed on Singapore Exchange Securities Trading Limited (SGX-ST), representing some 60% of the total market capitalisation and total market turnover of SGX-ST. The STI, which replaced the price-weighted Straits Times Industrials Index ("STII") on 31 August 1998, is the most widely followed benchmark of the Singapore stock market.
Mr Thomas Kloet, SGX CEO, said: "We are pleased to have concluded this agreement with SPHDS. It enables the Singapore Exchange to launch more indigenous contracts based on indices that are well established and widely followed by the investing public.
The launch of the STI futures will be significant as it will be the first contract to be launched since the formation of Singapore Exchange, and the first to harness the synergy of the securities and derivatives markets. We welcome the STI contract to our family of exciting equity index contracts."
Mr Cheong Yip Seng, Editor-in-chief of the English/Malay Newspapers Division of SPH said: "We are delighted that the Straits Times Index will be traded on the Singapore Exchange. We are also pleased to partner SGX in this endeavour and will give our fullest support for the successful development of the STI Index contracts."
SGX-DT already lists a futures contract based on the MSCI Singapore Free Index (SiMSCI). SGX-DT's Executive Vice President, Mr Jimmy Ang, said, "Although daily trading activity in the SiMSCI futures contract has been growing steadily, there is at the same time a growing need by retail investors for a futures contract on an index they are more familiar with. The STI futures contract will fill the needs of these investors."
Both SiMSCI and the STI futures contracts are expected to provide complementary trading opportunities between each other and with other stock index futures on SGX-DT.
In order to meet the needs of retail participants, the contract is designed to have a small contract size equivalent to S$5 multiplied by the STI index. Based on the closing index value of 2,164.11 on 28 April 2000, the size of each STI futures contract will be about S$10,820 (In comparison, the size of a SiMSCI contract is about S$ 57,600).
The STI futures will be cash-settled. It will only be traded electronically, via the SGX ETS (electronic trading system for derivatives) from 8.45 am to 12.35 pm and from 2.00 pm to 5.15 pm. As in the case of the SiMSCI contract, stockbrokers including their dealer representatives (DRs) can trade and broke the STI futures via the SESOPS trading workstations, which are linked to the SGX ETS.
