LSEG Singapore NDF platform to gain from EBS London shift

New matching engine could clean up in Asia as rival facility exits Tokyo


Traders expect London Stock Exchange Group’s new Singapore-based non-deliverable forwards platform to win big in regional market share as rival EBS moves its NDF matching engine to London.

The LSEG platform, dubbed NDF Matching, was announced in May and will launch in the city-state in mid-2023. The news comes just as EBS has jettisoned its Tokyo matching engine and moved matching of all NDF trades to London as part of its integration with parent CME Globex.

Traders say the LSEG platform will mop up interest from Asia-based market participants who want to use a trade-matching venue on their doorstep.

“As a simple example, if a market participant was sitting here in London, trading with a counterparty in Asia [and] the exchange was next to them here, they might have a potential advantage over a person sitting in Asia because they are a few milliseconds away from the exchange’s server,” says Paul Matherne, global head of foreign exchange trading and regional head of FX for Europe, the Middle East and Africa at BNY Mellon.

“A counterparty in Asia might take a quarter of a second to receive that information and be able to respond. So, there’s an asymmetry where you might have an advantage the closer you are to where that activity is taking place,” he adds.

Rival venue EBS has historically operated a follow-the-sun matching system, where the matching engine passed between Tokyo, London and New York as the day progressed. Since May 16, however, while local clients can still use existing connections to the Tokyo venue, NDF matching takes place in London.

Despite its exit from Asia, users of EBS say they have not seen a notable difference in latency since the May changeover.

But, given that most NDF volumes are against Asian currencies, market participants say LSEG’s Singapore venue could become significant for NDF trading.

Lim Wei Zhong, executive director of eFX distribution at Nomura, says the growing volumes of Asian currencies being traded via NDFs means Singapore is a “natural place to do matching for NDFs”.

“We believe that as the ecosystem continues to develop, this will help support clients with improved infrastructure for best execution, robust liquidity and enhanced price discovery,” says Lim. “Market-makers will be able to price and hedge better, which would translate into greater transparency and better pricing for our clients.”

Leo Tay, head of FX trading for Asia-Pacific at ING Bank, says having a matching engine located in Singapore will provide low latency to users in the city-state, giving them an advantage. The platform will also provide easy access to clearing at LCH-owned ForexClear – another LSEG company – and will help banks keep a lid on margin costs by clearing trades so they will not be subject to the higher initial margin requirements that apply to bilateral trades.

Jonathan Woodward, LSEG’S Singapore-based head of FX for Asia-Pacific capital markets, has said that he expects more regional and tier-two global banks, along with hedge funds and high-frequency traders, to set up technology stacks in the city-state as they look to access the market.

Tay believes LSEG’s NDF matching engine will offer opportunities for tier-two and tier-three banks – which traditionally do not have counterparty lines with some of the bigger banks – to trade with such global players.

BNY Mellon’s Matherne agrees: “You could be at an advantage the closer you are to the matching site. And you could reasonably expect there to be a trend towards having additional banks, market participants and systems closer to the site.”

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