DRAM chips are semiconductor chips used in a growing array of electronics products. They are necessary components in computers and computer-related equipment, and are increasingly needed in communication, entertainment and digital appliances. Worldwide, a total of about US$12 billion in revenue was chalked up by the DRAM industry in 2001.
The prices of DRAM chips have been subject to high volatility due to extreme fluctuations in demand and supply. SGX embarked on the development of a DRAM futures contract after feedback from chip manufacturers, users and other players in the electronics industry, regarding their need to manage risks and costs effectively. At the same time, the futures contract will present unique opportunities for trading and arbitraging by players in the financial and futures industries.
Mr Ang Swee Tian, President of SGX, said, "Introducing the world's first DRAM Futures is a result of leveraging on our expertise and established infrastructure for financial derivatives instruments. It is in line with SGX's strategy to create cost effective solutions for tomorrow's market, today."
This initiative is supported by the Infocomm Development Authority of Singapore (IDA) and the International Enterprise Singapore (IE Singapore).
Dr Kaizad Heerjee, Assistant Chief Executive of IDA, said "IDA is happy to support the launch of the world's first DRAM futures. This is another example of how technology acts as a key enabler to enhance the capabilities and catalyse growth of an industry sector. Such strategic exploitation of technology will boost Singapore's position as a leading infocomm hub in this region".
Mr Lee Yi Shyan, CEO of IE Singapore, said, "IE Singapore supports this initiative because we believe that having such a futures contract will enhance Singapore's position as an international trading hub. It emphasizes Singapore as a price discovery centre for all types of commodities, including high-tech products. The new futures contract will also contribute towards the development of high value industries in Singapore."
For the development and launch of DRAM Futures, SGX has engaged Semicon Exchange Pte Ltd (SemiconX) - a leading semiconductor trading platform provider - as its Industry Advisor. SemiconX will assist SGX in reaching out to the semiconductor industry, whose participation and support of the product will be key to its success.
Subject to regulatory approval, the DRAM Futures contract will be traded on the SGX derivatives market's Electronic Trading System (SGX ETS). The contract specifications, including the type of chip (128Mb, 256Mb, etc), will be finalized after further consultation with the industry. Meanwhile, it is envisaged that the contract will be denominated in US Dollars and that the size of each contract will be 10,000 pieces of DRAM with a value of approximately US$70,000.
