Singapore Exchange (SGXL.SI) said on Monday it will begin clearing over-the-counter trades in financial derivatives in October as part of a plan to broaden its range of financial products.

SGX, Asia’s second-largest bourse operator by market cap, will start by clearing U.S. and Singapore dollar interest rate swaps, and it plans expand the service to include foreign currency options and forwards, SGX President Muthukrishnan Ramaswami told Reuters.

 

The move will make SGX the first Asian bourse to clear financial derivatives traded over the counter.

 

The plan has the support of 10 banks which together account for 90% of the trading of interest rate swaps in Singapore, including Barclays (BARC.L), Deutsche (DBKGn.DE) and Royal Bank of Scotland (RBS.L), Ramaswami added.

 

"We look forward to expanding our membership and the asset classes offered," he said.

 

Policymakers around the world have been pressuring banks to settle their over-the-counter trades over a regulated exchange in order to reduce risks to the overall financial system, creating a business opportunity for bourse operators.

 

Singapore is the world’s fourth largest centre for foreign exchange trading with an average daily turnover of US$266 billion ($354.8 billion) in April 2010, according to the latest survey by the Bank for International Settlements. 

 

The Monetary Authority of Singapore, the city-state’s central bank, said average daily turnover in over-the-counter (OTC) interest rate derivatives was US$78 billion, up 37% from a year ago.