ASX to open Singapore office to attract Asian hedge fund cash

The ASX will hire staff for a new office in Singapore this year as Australia's main exchange operator seeks to do more business with Asian hedge funds and proprietary traders.

'It will be a meaningful presence,' Peter Hiom, Sydney- based deputy chief executive officer at ASX, said, adding that the Singapore office will focus on derivatives products. 'There's an untapped opportunity for us in Southeast Asia.'

The Australian bourse is expanding in derivatives, already its biggest source of revenue, as trading volumes for cash equities in its home market stagnate. Inflows into hedge funds are set to jump 25 per cent this year to the most since 2007, Barclays said last month, citing a survey of investors. CME Group (which operates New York and Chicago exchanges) and units of Deutsche Boerse have offices in Singapore as exchanges jostle for a share of the Asian market.

ASX's expansion into Singapore comes about three years after it had an $8.3 billion merger with Singapore Exchange vetoed by the government. The firm's international ambitions were dented when former Treasurer Wayne Swan rejected the tie-up, saying the move amounted to a takeover and wasn't in the national interest.

The exchange will report results for the first half of the 2014 financial year on February 13. Derivatives contributed 32 per cent of total revenue in the year through June 30, 2013, data compiled by Bloomberg show.

Client clearing

The bourse will in April start offering asset managers the ability to lodge collateral for derivatives trades with the exchange rather than their brokers, a product it's calling client clearing, Hiom said. Australian customers of a unit of MF Global Holdings, which collapsed in October 2011 after a $US6.3 billion bet on bonds of some of Europe's most indebted nations, faced lengthy battles in foreign courts to get repaid.

'MF Global is just an example of why you have to focus on this,' Hiom said. 'But the reason is regulatory change globally.'

Clearing houses cut risk by collecting collateral to back each transaction, monitoring daily price moves and making traders put up more cash as losses occur. Venues such as LCH.Clearnet, which last year was granted a license to operate in Australia, and those run by US exchanges CME Group and IntercontinentalExchange Group have become more important to the financial system as regulators globally push more trades through them.

Bloomberg