APEX derivatives bourse gets green light in Singapore

The Asia-Pacific Exchange, set up by a consortium of Chinese companies, has received final consent from the Monetary Authority of Singapore, making it the first Chinese-backed derivatives exchange to be launched in an overseas market.

APEX, which has about 60 employees, plans to start trading in the second quarter of this year. The exchange will offer futures and options contracts covering commodity and financial derivatives products, including agriculture, energy, petrochemicals, metals, interest rates and stock indices. Its first contract is for US dollar-denominated physically delivered palm olein futures.

It has also obtained a license from the Monetary Authority of Singapore to operate a clearing house.

APEX was founded by Chinese futures market veteran Eugene Zhu Yuchen, who led the Dalian Commodity Exchange, China Financial Futures Exchange, and Shanghai Pudong Development Bank. Other major shareholders include Chinese energy and financial services conglomerate CEFC China Energy, Chinese futures brokerage and investment consulting firm Xinhu Group and other international investment funds.

Lim Hwee Hua, Singapore's former minister in the prime minister's office, will chair the board of APEX. She said that APEX will work to "satisfy the huge unmet demand for hedging in commodities by Asian-centric participants".

Satvinder Singh, assistant chief executive officer at government agency International Enterprise Singapore, said that APEX will offer new risk management tools for global traders.

Wu Libo, an energy professor at Fudan University, said that the establishment of APEX was a meaningful exploration by Chinese companies to set up an overseas trading platform, which will help boost their pricing power and trading capability in global energy and commodities markets.

"China is a major consumer in the global energy and commodities market, but the lack of effective ways for Chinese companies to participate in global futures trading had led to their pricing disadvantage," she said.

The offering of renminbi-denominated products at APEX in the future will also boost the global profile of the Chinese currency and will help reduce the foreign exchange risks for Chinese companies in the futures trading, Wu added.

APEX will become the third derivatives exchange in Singapore Exchange and International Exchange Inc. Concerns have been thus expressed that APEX will pose competition to the existing futures exchanges.

Zhu addressed the concerns by saying that "there is room for more exchanges in the region".

"Experience in most countries shows that whenever competition is introduced, it generates buzz and increases market volumes all round," he said.

Zhu added that APEX will be well positioned for success in the years to come given that Singapore is an important partner in the Belt and Road Initiative.