War on latency driving banks to put FX engines in Singapore


To judge by the number of FX liquidity providers and execution venues setting up shop in Singapore, the city state’s efforts to establish itself as the premier FX trading centre in Asia appear to be paying off.

An environment that encourages providers to physically locate matching and pricing engines in Singapore is one of the key aspects of the industry transformation map of the Monetary Authority of Singapore (MAS).

And banks have responded.

This month, BNP Paribas said it would introduce an e-FX pricing and trading engine for spot, forward, swaps, non-deliverable forwards (NDFs) and options in Singapore over the next 18 months to capitalize on double-digit annual growth in electronic trading in southeast Asia.

Standard Chartered Bank’s local infrastructure will support a similar range of trading when it goes live later this quarter.

Matching FX trades in Singapore takes only one-to-two milliseconds for participants based here and in aggregate under 30 milliseconds for participants based in the southeast Asian region 

 – Wong Joo Seng, Spark Systems

In March, Citi announced plans for a pricing and trading engine in Singapore that would initially offer spot trading in 23 currencies, while JPMorgan will also go live with spot trading later this year.

UBS became the first global bank to launch an e-FX pricing and trading engine in Singapore in 2019.

Beyond the leading financial institutions, trading platforms LMAX and Euronext have also invested in local infrastructure, as has non-bank market maker Jump Trading. Euronext’s first spot FX trade on its Singapore matching engine took place in September.

And in the last few days, Standard Chartered Bank has executed the first trade on its e-pricing engine in Singapore with United Overseas Bank (UOB), claiming a reduction in trade latency of more than 80%.

Local market matching

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Wong Joo Seng,
Spark Systems

Demand from hedge funds, tier-one and tier-two FX banks for price discovery and liquidity remains robust and there has been an increase in local market matching as customers in the region transfer risk among themselves, according to Wong Joo Seng, founder and CEO of Singapore-based trading platform provider Spark Systems.

The impact on execution speed has been dramatic.

“Matching FX trades in Singapore takes only one-to-two milliseconds for participants based here and in aggregate under 30 milliseconds for participants based in the southeast Asian region,” says Wong.

“This will dramatically improve the instances of successful trade execution and reduce rejections.”

Christophe Jobert, BNP Paribas’s head of global markets for southeast Asia, says that for his clients the launch of the e-FX engine in Singapore will remove the round-trip latency of around 80 milliseconds that it takes to route a trading order through other countries.

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Christophe Jobert,
BNP Paribas

“We are confident that this will make a difference to how our clients here are able to discover price and will allow them to execute trades and access liquidity more efficiently,” he adds.

Scott Moffat, managing director for Asia-Pacific at LMAX Group, offers a measured assessment of the impact of this new infrastructure, suggesting it is too early to say definitively that there is better access to liquidity or more efficient price discovery.

“Although what we look for in terms of fundamentals are certainly there, we are still at a nascent stage of Singapore becoming a price discovery hub,” he says.

“Whilst the infrastructure exists, risk desks are predominantly still using the traditional centres of London and New York for their pricing and hedging. Until price discovery becomes local, there will be a latency price to pay when using overseas matching engines.”


As recently as 2018, it was suggested that Shanghai could be giving Singapore a run for its money within a few years. However, the most recent Bank for International Settlements data reveal that while FX trading turnover in China almost doubled between 2016 and 2019, at $136 billion it was still some way short of the $640 billion traded in Singapore every day.

The growth of trading volumes in Hong Kong over this period would appear to represent a much greater threat to Singapore’s supremacy in the region. However, political unrest in Hong Kong is likely to deter further investment in FX infrastructure – at least in the near term.

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Scott Moffat,
LMAX Group

Meanwhile, the Singapore Foreign Exchange Market Committee’s most recent survey of FX volume in Singapore suggests that average daily reported turnover increased by 15% between October 2018 and April 2019.

“There is no doubt that Singapore has a position of strength now as the undoubted Asia-Pacific hub for FX trading,” concludes LMAX’s Moffat.

“Whether it can realistically challenge the global centres of London and New York will depend on risk appetite within the region, infrastructure, growth of the NDF market and access to the holy grail that is a relaxation of capital controls in China.”

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