SIMEX : PRESENT ISSUES AND FUTURE CHALLENGES

Abstract

The objective of this academic exercise is to discuss the issues and problems of the past, the present and, most importantly, the future of futures market in Singapore. As financial futures is an ever-evolving instrument and has come to play a vital role in the international financial arena, it will be interesting to analyze what Simex and the government do to remain competitive under such worldwide transformations. Simex is able to influence some of these challenges but not all. Those that cannot be influenced can be serious enough to threaten its survival as an international futures exchange. However, it is to be emphasised that Simex and the government can and should do something abciut it. In this dissertation, the so-called "success" or objective function of Simex is drawn out and its explanatory variables are: (I) market liquidity; (2) external competition; (3) technological advancement and (4) rubs and regulations. The degree of market liquidity is determined by the number of active participants, and the volume and variety of contract traded. By external competition, we are concerned with the challenges from the other exchanges, especially with its most aggressive Asian rival, the Hongkong Futures Exchange. The advance in technology serves to increase opportunities for arbitrageurs and speculators, and yet may be a threat to Simex. What concern us here is the threat to Simex's most unique features, the mutual offset system (MOS) with Chicago Mercantile Exchange (CME). This is because MOS will be redundant if a global linkup supported by the new technology is effected. Finally, the rules and regulations, which play an important role in any exchange, should be responsive to the changing environment so as to cater to the changing needs of the investors. Immediately following the discussion of each factor, policy recommendations will be presented and their feasibilities assessed. In conclusion, Simex has proven itself to be very adaptive to world changes and by far adopted policies with g.-eat speed to cater to the immediate needs of the market. Hence, it is optimistic that Simex will continue to be an efficient international futures market, particularly in the Asia-Pacific region.