Friday May 13, 2011

Singapore : SGX to try to boost volume by attracting high frequency trading

In a move to stay competitive, the Singapore Exchange (SGX) has unveiled several strategies to attract more traders and raise trading volumes. This follows its recent failed bid to merge with the Australian Stock Exchange [ASX]. One of these will be to woo high frequency traders. High frequency trading (HFT) is a type of computer-programmed trading which involves no human interaction. It currently accounts for 30% of the derivatives trading volume on the Singapore Exchange. And SGX said it hopes to raise that level higher but declined to provide any targets. HFT potentially could support growing liquidity, making it more accessible for new capital and for investors to participate in the market." Other initiatives to improve the bourse's competitiveness include reducing tick sizes, and increasing its product range to include metal futures. Come mid-August, SGX will launch Reach, which cost S$250 million and is the world's fastest trading engine.

- Barely just over one year after the 6 May 2010 Flash Crash where the Dow Jones index fell by 900 points due to high frequency trading, Singapore wants to have a go at the same kind of trading techniques that have been determined to be the main factors behind the falling-off-the-cliff behaviour of the US stock markets that day.

And that was even with large volume and highly liquid stock markets like the NYSE. So, is HFT even advisable for much smaller markets like the Singapore stock market? I don't think so. But I'd suppose they are going ahead anyway, now that they do not seem to have many new ideas or further initiatives since the failed ASX bid.

(2011-05-13 14:04:43 SGT) [Biz] Permalink

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