The Singapore Exchange (SGX) is in preliminary talks to be part of a Southeast Asian rubber exchange that would bring together the top three producing nations, industry sources said on Tuesday.
SGX held a meeting late last month with the International Tripartite Rubber Council (ITRC), an industry body comprising Thailand, Indonesia and Malaysia, which together produce 70 % of the world’s rubber.
The meeting came three months after ITRC said it was studying a plan to set up a regional exchange to facilitate hedging and easy trade for the different rubber grades, amid a tumble in prices of the commodity to five-year lows.
SGX said in an emailed statement on Wednesday that it was “happy and ready to work with ITRC to establish a regional rubber market.
“We understand that studies and consultations are still ongoing within … an expert group of the ITRC, so any cooperation model will have to be considered after that,” said Lily Chia, head of SGX’s commodities product development and management.
SGX, whose SICOM futures contract is already the benchmark for the TSR20 rubber grade, has proposed several models for the regional exchange, including connecting commodity exchanges in the three countries to its platform to provide integrated trading, clearing and delivery, said a source with direct knowledge of the matter.
Another proposed option is to operate individual trading venues and use SGX’s clearing and delivery mechanism, added the source, who did not wish to be named as the talks are private.
However, the sources said it was possible for the three producing countries to start their own platform, without involving SGX.
No final decision on the regional exchange has been made yet, though the industry group had said in November that it was looking to launch the bourse in 18 months.
ITRC would prefer to wait until a study, led by UK-based consultancy LMC International, on the viability of such a regional exchange is completed, said a Malaysian official present at the February meeting.
It was not clear if anyone outside of the top three producers and SGX had made proposals to join ITRC’s proposed regional bourse.
Apart from SGX’s SICOM contract, the other established rubber contracts are traded on the Tokyo Commodity Exchange and Shanghai Futures Exchange.
“We haven’t discussed yet when exactly we will meet with SGX again but from earlier talks we agreed that we should definitely meet again in the coming months,” said Yiam Thavarorit, chief executive of the International Rubber Consortium Ltd, part of ITRC.