Among jurisdictions that regulate CFD trading trading, Singapore is now the world’s fourth-largest market, after Britain, Germany and Australia which are about equal in size. In Singapore CFDs compete with ‘extended settlement’ (ES) contracts which have been offered by the SGX since February 2009 and basically work in a similar way. It seems, however, that CFDs are gaining ground since extended settlement contracts typically suffer from low liquidity.
CFDs are also gaining ground on the market for structured warrants market – there, turnover in warrants in 2009 was $10.9 billion, down by half from 2008 and by 61 per cent from 2007’s record high of $28 billion. As a result, average daily warrant business in 2009 was $43 million compared to $84 million in 2008.
The main market players here are local brokers like CIMB-GK Securities, Phillip Securities, and Kim Eng Securities and foreign CFD providers like IG Markets, Saxo Capital and CMC Markets. Research specialist Investment Trends estimates that there are around 23,000 active traders in Singapore (November 2011), many holding accounts with different brokers. UK provider CMC Markets is in second place and IG Markets, a unit of London-listed IG Group, is presently at number four (November 2011). The market is still growing and could easily double within the next two years.
The typical customer is a working professional between 25 and 55. About 40 per cent use CFDs to trade foreign currencies; another 35 per cent trade shares (with an average holding period of 25 days).
CFD Trading in Singapore
It’s not surprising that contracts for difference (CFDs) have become so popular around the world. They represent one of the easiest ways to leverage your trading account, to a significant extent, and the Internet has made global transactions much easier. It’s been said that the CFD market is the fastest growing in the world. That said, any enterprises that wish to do business in a certain country are well advised to open a local office, thereby gaining the confidence of the locals and also learning local habits.
That is just the case in Singapore, where CFD brokers have been expanding their offices and their offerings in order to snap up the local business. Take for example CMC Markets. The director of the Asia region, Gavin Ward, has reported that Singapore is now the fourth largest market for their business, after the United Kingdom, Germany, and Australia. They now have over 3000 clients in the country, a growth of 25% over last year.
One reason that CFDs are so popular is the flexibility that they offer. It is as easy to go short as to go long, and many trading platforms allow trading in stock indices, foreign currencies, and commodities, as well as individual stocks. Ward thinks part of the success of his brokerage is because of the economic crisis, which made ‘people more aware of stock markets now’.
Another major broker in Singapore is called POEMS, which stands for Phillip’s On-line Electronic Mart System. This title covers many different businesses, and to trade CFDs with Phillip you need to have an equity account in good standing so that the CFD account can be added on. Again, the Phillip group have a significant presence in Singapore and Asia in general.
Global Forex Trading (GFT) began in the USA in 1997, and has a Singapore office regulated by the Monetary Authority of Singapore (MAS), the body with which all local brokers must comply. Kim Eng is a brokerage that uses a Direct Market Access (DMA) model, which gives 100% transparency to the pricing, making it the same as the underlying exchange. There are several other providers of CFD trading in Singapore, and these are the main ones.
IG Markets Singapore, part of IG Group, a FTSE-250 listed company, started in the UK and entered the Singapore market in 2006. The Singapore office is now one of 15 worldwide and IG offers both the market maker and DMA trading model.
It seems that Singapore is embracing this latest wave of financial companies, which are after all only attracted to set up shop in Singapore because of the potential market. The only one of those named which is headquartered in Singapore is Kim Eng, and as this has been established for nearly forty years there is some measure of loyalty amongst the locals. In fact, unlike most brokerages, Kim Eng has been actively expanding out from Singapore, with businesses in the UK and the USA as well as many other Asian locations.
It can be expected that Singapore will continue to grow in its use of CFDs, which are becoming the trading vehicle of choice in most countries.