Why does Singapore Exchange Seek High-Frequency Traders?

Singapore Stock Exchange (Bloomberg)

According to Bloomberg, Singapore Exchange Ltd. (SGX)Southeast Asia’s biggest bourse operator, wants to lure more high-speed traders on to its stock market as it grapples with lower volume.

Computerized trading firms, which execute transactions in fractions of a second, account for a negligible share of volume on Singapore Exchange’s cash equities market, according to bourse spokeswoman Loh Wei Ling, while they contribute 30 percent of revenue from derivatives. Singapore Exchange will seek to change that once it introduces safeguards, Chief Executive Officer Magnus Bocker said at a briefing this month.

“We will pursue high-frequency trading once we have circuit breakers and other policies in place,” he said. “That will enhance the liquidity and quality of the Singapore market.”

High-frequency traders facilitate the majority of U.S. equity transactions, where computerized firms have ample opportunity to profit from fleeting price discrepancies because transactions take place on more than 50 venues. Singapore isn’t as fragmented, which keeps computer traders away. Credit Suisse Group AG and Tabb Group LLC said the city’s relatively high trading and clearing fees also deter those firms.

Bocker is seeking more business with the daily average value of equity trades down to about S$1.5 billion ($1.2 billion) this year, a 36 percent plunge from 2007, according to datacompiled by Bloomberg. Singapore Exchange’s net income was S$336 million for the fiscal year that ended in June, 20 percent lower than fiscal 2007. SGX climbed as much as 0.7 percent today, before closing 0.4 percent lower at S$7.38.

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