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21 November 2019

Singapore poised to allow crypto derivatives on approved venues

The regulator stated that the plans are in response to interest from hedge funds and asset managers that trade such products.

Singapore skyline/Bloomberg

Singapore’s financial regulator has proposed green-lighting crypto-token derivatives to list and trade on approved domestic exchanges, reported Bloomberg.

The Monetary Authority of Singapore (MAS) said that under the proposal, trading of derivatives on common cryptocurrencies such as Bitcoin and Ether will be subject to the Securities and Futures Act.

Singapore is joining the global race for crypto derivative trading as institutional investors increasingly seek ways to hedge their exposure to the assets. Giant US bourse operators CME Group and Intercontinental Exchange already offer futures and plan to introduce other derivative products in the next few months.

The amount of derivatives traded worldwide on Bitcoin alone is around $5 billion to $10 billion a day—exceeding spot volume by 10 to 18 times—according to recent estimates from data trackers Skew and The volumes were about equal at the start of the year, though definitive figures are hard to come by from exchanges.

Additionally, MAS said that the proposal will allow approved exchanges in Singapore to meet the need of investors to manage their exposure to payment tokens while bringing the activity under regulatory oversight.

In September, ICE’s Bakkt platform debuted Bitcoin futures that settle in the digital currency, and the bourse plans to offer options on them next month. ICE Futures Singapore aims to launch a cash-settled futures contract on 9 December 2019. CME Group, the world’s largest exchange operator, has offered cash-settled Bitcoin futures since December 2017 and will introduce options on them in January 2020.

While Singapore Exchange Derivatives Trading, a local unit of Atlanta-based ICE and Asia Pacific Exchange are among the MAS-approved venues, none of them currently list such products. The regulator does not plan to include crypto derivatives that aren’t offered by an approved exchange, added MAS.

The MAS is encouraging a cautious approach for retail investors, saying it considers crypto derivatives not suitable to most of them. According to the monetary authority, the proposed measures include a minimum 50 per cent margin requirement for retail investors.

RELATED STORIES: Bakkt platform Intercontinental Exchange Monetary Authority of Singapore Singapore Exchange Derivatives Trading





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