Deutsche Börse is launching a clearing house in Singapore as the German exchange operator aims to double revenues in the region over the next five years.
Reto Francioni, chief executive officer of Deutsche Börse, had said in a speech in January that the exchange was focused on Asia for its growth strategy.
Last week Gregor Pottmeyer, chief financial officer, said during the results presentation that Deutsche Börse is launching a clearing house in Singapore which will be wholly owned by the exchange.
Pottmeyer said: “We expect this to have high strategic development potential. Our objective is to provide long-term client-oriented products and a robust infrastructure across the entire Asian time zone from this base and thus to contribute to the systemic stability of the region's capital markets.”
In 2007 the German exchange generated sales revenue of around €50m in Asia and this has increased to over €100m. Deutsche Börse now aims to increase Asian revenues to €200m over five years.
Clearstream, Deutsche Börse’s international central securities depository opened a branch in Singapore in 2009 so the group is familiar with the local regulator, the Monetary Authority of Singapore.
Last September, Clearstream and the Singapore Exchange also signed a letter of intent to launch a collateral management service which enables customers to use collateral held at CDP, the SGX securities depository, more efficiently. Pottmeyer said this model could be expanded to other markets in the region.
Eurex, the derivatives exchange owned by Deutsche Börse, has an agreement with the Korean stock exchange for products based on the KOSPI, the Korean benchmark index. In May Eurex is slated to launch a similar link with the TAIFEX, the Taiwanese futures and options exchange in which it has purchased a 5% stake. The new clearing house in Singapore will clear Eurex offerings but will also have the scope to add other products.
Deutsche Börse is following US rival, IntercontinentalExchange, who this month closed its acquisition of Singapore Mercantile Exchange to provide ICE with exchange and clearing infrastructure in Asia for the first time. SMX will move to the ICE trading and clearing systems after consultation with market participants, clearing members, and regulators.
This month Eurex said that C7, its new clearing technology which will replace the existing Eurex Clearing system, will be available in a simulation environment from 15 April 2014 ahead of the production launch on 30 June 2014.
The new technology platform follows last year’s launch of Eurex Clearing Prisma, a risk management system which takes a portfolio approach rather than the traditional product-by-product approach to margining.
Thomas Mills, an analyst at financial services boutique KBW, said in a report after Deutsche Börse ’s results: “Whilst we acknowledge Eurex volumes have been a little stronger than originally anticipated, we continue to think 15 times 2015E earnings looks a more than fair valuation, particularly when considering the market is looking for +12% year-on-year earnings per share growth in 2014. For a company that has seen nothing but EPS cuts for the last couple of years and lacks a meaningful self-help story, we think any further re-rating is a leap of faith too far.”
