The Singapore Mercantile Exchange (SMX) launched gold, oil and euro-dollar futures on Tuesday and received a muted response from investors.

Gold (SMAUc1) was the most popular contract trading a total of 61 lots by 0755 GMT, each of 32 ounces, or 1,952 ounces. The euro-dollar futures (SMEUc1) were second with 23 lots traded, equivalent to a little under 1.1 million euros ($1.89 million) in value.

 

The well-established COMEX gold contract in New York traded over 90,000 of its 100 ounce lots of Friday. On its launch day in June 2008 the Shanghai Futures Exchange traded some 14 million lots of gold, equivalent to 225,000 ounces.

 

Activity in the two inaugural crude oil contracts was more limited, with four lots of West Texas Intermediate (WTI) (SMCOc1) and one of euro-denominated Brent (SMBTc2) traded at 61 euros a barrel, the first time oil is priced using the single currency on any exchange.

 

“Their challenge now is to build global buy,” said Brad Ridge, a Singapore-based director of Asia product development at ICAP, a global commodity broker. And “establish market-maker liquidity around meaningful benchmarks in this time zone.”

 

To boost its appeal to clients in the region, the exchange will “soon” launch U.S. dollar-Australian dollar and dollar-yen futures, according to SMX Chief Executive Thomas McMahon.

 

Attracting liquidity will be just the first step in a strategy SMX expects will yield Asia's first local commodity and energy benchmarks within a benign regulatory framework, compared to rules that have become more stringent in the United States and Europe after the financial crisis of 2008.

    

“It’s not liquidity which will happen today, and even if it is ten trades today, we are very happy because Singapore has the best regulatory mechanism and banking system,” said SMX vice-chairman Jignesh Shah.

 

SMX, owned by India’s Financial Technologies, plans to announce exchange members later this week, McMahon said.

 

Cross-asset bourses such as SMX handle the bulk of cleared global energy and commodities trade. In many cases, commodity exchanges work on a trial-and-error basis, listing and de-listing contracts for a range of commodities, with different specifications. In some cases, they take hold quickly, but in others they go into oblivion.

 

SMX has identified 34 products in the metals, energy, currencies and agricultural markets that could eventually trade on the exchange. McMahon has signalled copper and palm oil may be among the first to be introduced.

 

The competition is huge, but so is the prize: a share in a market with an estimated open interest of at least US$720 billion ($976 billion) in end-August, including positions held in the Chicago Mercantile Exchange (CME), the ICE Intercontinental Exchange, the Chicago Board of Trade (CBOT) and the London Metal Exchange (LME).

 

“I firmly believe that SMX will provide the benchmarks that will unify the Asian marketplace,” SMX’s Shah said, referring to the current fragmented array of exchanges in the region.

 

Existing commodity exchanges in Asia include the Dubai Mercantile Exchange (DME), which trades mostly energy products, the Hong Kong Mercantile Exchange (HKMEx), which focuses on China and just trades gold, and the Tokyo Commodity Exchange (TOCOM), which is centred around Northeast Asia and is a partner of SMX.