Futures Exchange Is a Leader

The Sydney Futures Exchange, which celebrated its 30th anniversary last year, is one of the oldest open-outcry marketplaces in the Asia-Pacific region - and one of the oldest futures exchanges in the world outside Chicago, New York, or London.

It began life as the greasy-wool futures exchange in 1960, but since then, with the increasing importance of financial products, the Sydney Futures Exchange has come to place less emphasis on physical commodities.

In the past five years, the exchange has become the eighth-largest futures and options exchange in the world, attracting business from the United States and Europe.

An after-hours, automated-screen dealing system for overnight trading, called SYCOM, allows the exchange to remain open for trading around the clock, giving New York and Chicago easy access at any time.

Indeed, a version of SYCOM has been adopted by the New York Mercantile Exchange, which underscores the Sydney exchange's position at the leading edge of technological development.

The exchange's chief executive, Les Hosking, thinks Sydney has considerable advantages over its nearest major futures exchange neighbor, the Singapore Futures Exchange.

"Singapore is on a par with Sydney, but in the brokerage market it isn't as strong, and it is not as liquid," Mr. Hosking said. "We believe we have the strongest broking fraternity in the Asia-Pacific region, and access into Sydney trading is far easier than into Tokyo.

"Worldwide, I would say Sydney is the exchange that best keeps up alongside developments in the" United States, he said. "That's not to say Singapore hasn't done a spectacular job, which it has, but of course Singapore offers only the big international contracts, whereas Sydney has a range of domestic contracts."

Sydney's Head Start

The Sydney exchange began offering financial instruments 12 to 15 years before either Singapore or Tokyo, and Mr. Hosking said he is proud of the exchange's ability to adapt and of its overall resilience.

During the stock market crash of October 1987, not one member of the exchange failed to meet a margin call, and Mr. Hosking pointed to Hong Kong, where the futures exchange virtually collapsed.

The key to the Sydney exchange's success, Mr. Hosking believes, is the excellent liquidity that players in the Sydney market enjoy.

"Although I would point out that the cost of trading in Sydney is much, much lower than either Singapore or Tokyo, I think the most significant factor in choosing a contract is liquidity, which overrides the cost," Mr. Hosking said. "And our liquidity has never been a question."

One of the exchange's most prominent characteristics - and this stems directly from Mr. Hoskings' own enthusiasm - is its dedication to innovation.

An Edge in Options

"The future in exchange-traded products will be options, and we are far more advanced in Sydney, than anyone else in the region," he said. "While we have seen a slight downturn in futures volumes traded, reflecting the slowdown in the Australian economy, options trading has gone up a lot."

In addition, Mr. Hosking believes the attractiveness of the exchange also lies in the talent of those involved in it, talent which is very much Australian.

"Singapore has always had to import their traders," Mr. Hosking said, "but because of the long Australian futures experience, we have never had to import talent.

"Also, the benefit for the U.S., in particular, in trading into the Australian market is that they can look at us as English-speaking, having a similar legal system, and of course, genuine political stability, which is crucial."

"Now that we are in our fourth decade, the experience, liquidity, and history of innovation puts the SFE second to none in the region," Mr. Hosking said, "and certainly in the same class as Chicago and London.

"We are right up there with the U.S. and, in some cases, are even ahead.

"For instance, we can detect if customers are being disadvantaged more easily than they can in Chicago because of our relative size."

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