With the launch of the Singapore Mercantile Exchange (SMX), a pan-Asian multi-product commodity and currency derivatives exchange, on Tuesday the focus of bullion traders has shifted from London to Asia.
The SMX commenced trading in four futures contract - Brent crude oil (euro-denominated), West Texas Intermediate crude oil, gold and euro/US dollar currency - on Tuesday.
The SMX gold contract will be the first in Singapore to be settled through physical delivery. Monetary Authority of Singapore (MAS), Singapore's market regulator, had granted an approved exchange status to operate as a regulated and fully-licensed exchange to SMX on August 12.
The four SMX futures contracts launched on the first day of trading on its platform include the first Gold futures contract in Singapore to be settled via physical delivery.
The exchange has ensured that Asia is no longer a price taker, but a price setter. Last year, about 6.2 billion of the total 6.3 billion commodity contracts across the global were from Asia.
The SMX hopes to take advantage of surging Asian appetite for commodities and their derivatives. SMX has identified 34 products in the metals, energy, currencies and agricultural markets that could eventually trade on the exchange. Copper and palm oil may be among the first ones to be introduced after the opening four.
SMX hopes one of the selling points for its gold contract would be the option of physical delivery in Singapore against positions. Still, some traders were sceptical whether this would help attract liquidity because of the growing popularity of exchange-traded funds (ETFs), which many investors prefer.