Deutsche Bank has announced that it will establish an electronic foreign exchange (e-FX) hub in Singapore by developing an FX trading and pricing engine onshore, in conjunction with the Monetary Authority of Singapore (MAS).

The bank ranked number 2 for FX globally in 2019, according to Euromoney. The initiative will make the city-state of Singapore Deutsche Bank’s fourth global FX centre, along with New York, London and Tokyo.

The Singapore e-FX hub will provide clients with the ability to execute FX transactions more closely aligned with geographic location, reducing latency, improving on local price transparency and liquidity.

"Given the substantial increase in demand for Asia currency e-FX we have seen in the past five years, growing client sophistication in e-FX trading, and the MAS’ focus on further developing the leading FX centre in the region, hubbing this activity in Singapore makes perfect sense,” said David Lynne, head of Fixed Income and Currencies APAC, head of Corporate Bank APAC and chief country officer, Singapore at Deutsche Bank.

The Deutsche Bank e-FX hub will be developed and staffed locally, and will be aligned to the bank’s focus across e-trading, fintech clients and digital FX payments.

“We are heartened by Deutsche Bank’s commitment to build its fourth global FX electronic pricing and trading engine in Singapore, which will complement its APAC fixed income and currencies and global transaction businesses operating here," said Gillian Tan, executive director, Financial Markets Development at MAS. "This will allow Deutsche Bank to build on its strengths as a key global FX player and support its regional clients with enhanced price discovery and execution from Singapore, while leveraging Singapore’s strengths as Asia’s pre-eminent FX centre.”

As global cross border payment processes rapidly move towards being completely digital, Deutsche Bank will further develop its Singapore infrastructure to be the payments hub for transactional FX business in APAC. This will enable the bank to offer faster, automated FX and payment processes across the high growth but complex Asia markets, creating a centre of excellence to drive digital real time treasury and open banking from Singapore into payment corridors across the region and globally.

With Singapore the Fixed Income and Currencies centre for Deutsche Bank in Asia Pacific, the new e-FX hub forms part of the bank’s continued investment and development into digital and electronic platform client solutions.

Singapore also attracts BNY Mellon 

Just last week, BNY Mellon also announced it would be expanding its FX footprint in Singapore with the launch of an FX pricing and trading engine, in partnership with MAS.

The bank will establish a low-latency electronic FX infrastructure in the Southeast Asian nation, helping to improve execution quality and price discovery for clients initially in spot, and subsequently in deliverable and non-deliverable forwards and swaps.

“We’ve spent the past four years fully integrating and accentuating our global FX capabilities, and this is just the next step in the bank’s commitment to the region, specifically to Singapore as the hub of our Asia G10 FX trading,” said Darren Boulos, head of FX Sales and Trading in Asia-Pacific at BNY Mellon. “With the benefit of local support, we can accelerate our offering of additive liquidity to clients.”

BNY Mellon already sees significant FX volumes in Singapore across more than 70 deliverable currencies, including in most restricted APAC markets, thanks to the uncorrelated liquidity that comes with executing daily flows for clients of its large custody franchise. In 2019, the bank set up a dedicated FX custody trading desk in Singapore, relocated its Short-Term Interest Rate Trading (STIRT) business from Hong Kong, and established a Singapore options trading desk.

MAS strategy paying off

Deutsche Bank and BNY Mellon are the latest in a series of banks that are focussed on Singapore as an FX trading hub for Asia. Back in April, we reported on CTMfile that J.P. Morgan had established an electronic FX trading and pricing engine in Singapore. The partnership with MAS was described as being part of the central bank’s strategic initiative to develop Singapore into a global price discovery and liquidity centre for FX during Asia trading hours.

All of these announcements have one thing in common - the close partnership between the banks and MAS, which reflects the strategy of MAS to attract global banks to the country. 

In a fireside chat at ACI Live Aid: Financial Markets Give Back, on 29 May 2020, Ravi Menon, managing director of MAS spoke in depth about the country's approach to FX trading. He noted that FX and treasury has been one of the better performing segments in the financial industry, and that the Singapore FX market had been able to manage the volatility from the global impact of COVID-19.

FX trading volumes in March hit a record high because people were hedging, offloading, and readjusting their investment positions. Activity has now come down to a more normal level. Menon noted that spreads have widened, which is to be expected in times like these, but that they have not widened unduly and there is sufficient liquidity in the system.

In terms of the FX infrastructure that MAS has been putting in place to support swings in trading activities, Menon noted that MAS wanted pricing and matching engines to be based in Singapore, so that they would not have to wait for prices to be matched in London, New York, or Tokyo. He explained there is still a time lag taken to route orders to these markets. Sometimes there are execution errors with these lags, particularly during periods of trading volatility.

Menon also commented that Singapore has had success in attracting key liquidity providers and platforms to base their pricing and matching engines in the country. In addition to the aforementioned BNY Mellon, Deutsche Bank, and J.P. Morgan, the country hosts similar FX engines of Citibank, Standard Chartered Bank, UBS, BNP Paribas, XTX, and Jump Trading.

The MAS strategy is clearly paying off, making Singapore an FX leader not just in Asia, but at the top table globally.