Continuing our series of analyses in which we look at the retail Forex (FX) and contracts for difference (CFD) industries in individual countries, this time we visit the Asian continent, taking a look at Singapore. This culturally and linguistically diverse country, which has enjoyed complete independence since the 1960s, is developing rapidly and has an exciting and advanced financial market.
Singapore, One of Asia’s Four Tigers
Modern Singapore was founded in 1819 by Stamford Raffles as one of the trading posts of the British Empire. Singapore became an independent state in 1959, a few years later becoming a member of the federation of Malaysia. Two years later, it was expelled for ideological reasons, becoming a completely independent country.
Despite initial turbulence, the sovereign island city-state in maritime Southeast Asia grew rapidly and became one of the Four Asian Tigers, building its strength on foreign trade. It is currently ranked ninth in the world by the UN Human Development Index (HDI) and has the second-highest gross domestic product per capita (PPP) globally, projected to reach almost $108,000 in 2021.
At the same time, it is worth noting that Singapore is the only Asian country currently rated AAA by foreign rating agencies worldwide. It stands out as an important financial hub and tax haven, attracting many foreign investors and companies.
Among them are
Forex Forex Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest trading market by volume. According to the Bank of International Settlements (BIS) latest survey, the Forex market now turns over in excess of $5 trillion every day, with the most exchanges occurring between the US Dollar and the Euro (EUR/USD), followed by the US Dollar and the Japanese Yen (USD/JPY), then the US Dollar and Pound Sterling (GBP/USD). Ultimately, it is the very exchanging between currencies which causes a country’s currency to fluctuate in value in relation to another currency – this is known as the exchange rate. With regards to freely floating currencies, this is determined by supply and demand, such as imports and exports, and currency traders, such as banks and hedge funds. Emphasis on Retail Trading for ForexTrading the forex market for the purpose of financial gain was once the exclusive realm of financial institutions.But thanks to the invention of the internet and advances in financial technology from the 1990’s, almost anyone can now start trading this huge market. All one needs is a computer, an internet connection, and an account with a forex broker. Of course, before one starts to trade currencies, a certain level of knowledge and practice is essential. Once can gain some practice using demonstration accounts, i.e. place trades using demo money, before moving on to some real trading after attaining confidence. The main two fields of trading are known as technical analysis and fundamental analysis. Technical analysis refers to using mathematical tools and certain patterns to help decide whether to buy or sell a currency pair, and fundamental analysis refers to gauging the national and international events which may potentially affect a country’s currency value. Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest trading market by volume. According to the Bank of International Settlements (BIS) latest survey, the Forex market now turns over in excess of $5 trillion every day, with the most exchanges occurring between the US Dollar and the Euro (EUR/USD), followed by the US Dollar and the Japanese Yen (USD/JPY), then the US Dollar and Pound Sterling (GBP/USD). Ultimately, it is the very exchanging between currencies which causes a country’s currency to fluctuate in value in relation to another currency – this is known as the exchange rate. With regards to freely floating currencies, this is determined by supply and demand, such as imports and exports, and currency traders, such as banks and hedge funds. Emphasis on Retail Trading for ForexTrading the forex market for the purpose of financial gain was once the exclusive realm of financial institutions.But thanks to the invention of the internet and advances in financial technology from the 1990’s, almost anyone can now start trading this huge market. All one needs is a computer, an internet connection, and an account with a forex broker. Of course, before one starts to trade currencies, a certain level of knowledge and practice is essential. Once can gain some practice using demonstration accounts, i.e. place trades using demo money, before moving on to some real trading after attaining confidence. The main two fields of trading are known as technical analysis and fundamental analysis. Technical analysis refers to using mathematical tools and certain patterns to help decide whether to buy or sell a currency pair, and fundamental analysis refers to gauging the national and international events which may potentially affect a country’s currency value. Read this Term brokers and trading platforms that offer retail clients investing in contracts for difference.
Monetary Authority of Singapore (MAS) Regulates the FX/CFD Industry
Retail CFD trading in Singapore is fully legal, and local investors can use any broker of their choice, not just those located directly in the country. However, those who wish to provide their services locally must be accredited and licensed by the Monetary Authority of Singapore (MAS).
The regulator is one of the most active financial watchdogs in the world and is highly respected in the industry. This is why most big brokerage brands have their own MAS licenses. Among them are IC Markets, IG, Saxo Bank, CMC Markets, Interactive Brokers, Plus500, etc. At the moment, there are 39 different entities licensed as “Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading” in the country. Their complete list is available here.
Like many other jurisdictions around the world, Singapore has campaigned against high
leverage Leverage In financial trading, leverage is a loan supplied by a broker, which facilitates a trader in being able to control a relatively large amount of money with a significantly lesser initial investment. Leverage therefore allows traders to make a much greater return on investment compared to trading without any leverage. Traders seek to make a profit from movements in financial markets, such as stocks and currencies.Trading without any leverage would greatly diminish the potential rewards, so traders need to rely on leverage to make financial trading viable. Generally, the higher the fluctuation of an instrument, the larger the potential leverage offered by brokers. The market which offers the most leverage is undoubtedly the foreign exchange market, since currency fluctuations are relatively tiny. Of course, traders can select their account leverage, which usually varies from 1:50 to 1:200 on most forex brokers, although many brokers now offer up to 1:500 leverage, meaning for every 1 unit of currency deposited by the trader, they can control up to 500 units of that same currency. For example, if a trader was to deposit $1000 into a forex broker offering 500:1 leverage, it would mean the trader could control up to five hundred times their initial outlay, i.e. half a million dollars. Likewise, if an investor using a 1:200 leveraged account, was trading with $2000, it means they would be actually controlling $400,000, i.e. borrowing an additional $398,000 from the broker. Assuming this investment rises to $402,000 and the trader closes their trade, it means they would have achieved a 100% ROI by pocketing $2000. With leverage, the potential for profit is clear to see. Likewise, it also gives rise to the possibility of losing a much greater amount of their capital, because, had the value of the asset turned against the trader, they could have lost their entire investment.FX Regulators Clamp Down on Leverage Offered by BrokersBack in multiple regulators including the United Kingdom’s Financial Conduct Authority (FCA) took material measures to protect retail clients trading rolling spot forex and contracts for difference (CFDs). The measures followed after years of discussion and the result of a study which showed the vast majority of retail brokerage clients were losing money. The regulations stipulated a leverage cap of 1:50 with newer clients being limited to 1:25 leverage. In financial trading, leverage is a loan supplied by a broker, which facilitates a trader in being able to control a relatively large amount of money with a significantly lesser initial investment. Leverage therefore allows traders to make a much greater return on investment compared to trading without any leverage. Traders seek to make a profit from movements in financial markets, such as stocks and currencies.Trading without any leverage would greatly diminish the potential rewards, so traders need to rely on leverage to make financial trading viable. Generally, the higher the fluctuation of an instrument, the larger the potential leverage offered by brokers. The market which offers the most leverage is undoubtedly the foreign exchange market, since currency fluctuations are relatively tiny. Of course, traders can select their account leverage, which usually varies from 1:50 to 1:200 on most forex brokers, although many brokers now offer up to 1:500 leverage, meaning for every 1 unit of currency deposited by the trader, they can control up to 500 units of that same currency. For example, if a trader was to deposit $1000 into a forex broker offering 500:1 leverage, it would mean the trader could control up to five hundred times their initial outlay, i.e. half a million dollars. Likewise, if an investor using a 1:200 leveraged account, was trading with $2000, it means they would be actually controlling $400,000, i.e. borrowing an additional $398,000 from the broker. Assuming this investment rises to $402,000 and the trader closes their trade, it means they would have achieved a 100% ROI by pocketing $2000. With leverage, the potential for profit is clear to see. Likewise, it also gives rise to the possibility of losing a much greater amount of their capital, because, had the value of the asset turned against the trader, they could have lost their entire investment.FX Regulators Clamp Down on Leverage Offered by BrokersBack in multiple regulators including the United Kingdom’s Financial Conduct Authority (FCA) took material measures to protect retail clients trading rolling spot forex and contracts for difference (CFDs). The measures followed after years of discussion and the result of a study which showed the vast majority of retail brokerage clients were losing money. The regulations stipulated a leverage cap of 1:50 with newer clients being limited to 1:25 leverage. Read this Term in recent years. Eventually, the leverage level for FX instruments for retail investors was limited to 20:1 as decided in October 2019. Although accredited investors still have access to higher leverage (50:1), qualification is not easy.
A trader must have personal assets over $1.5 million or must hold more than SGD1 million in his pocket or earn more than SGD300,000 per year.
Singapore an Important Market for International Brokers
Financial figures released by major brokerage brands operating in markets around the world show that Singapore has been an important base in recent years in terms of both active client numbers and generated revenues.
This is confirmed, among others, by IG Group’s latest report summarizing its financial results for the first half of fiscal 2022 which ended 30 November 2021. While the UK, EU, EMEA and Australian markets dominate in terms of financial numbers, Singapore ranks fifth, delivering £36.7 million in revenue for the reported period (by comparison, the UK business brought the broker £157.2 million in revenue). This was quite a leap from the results for the first half of fiscal 2020 when revenue was £21.5 million.
At a time when profits generated by IG Group in Singapore are around four times smaller than those in the UK, the client base between the two jurisdictions is already more than five times smaller. IG Group served 51,800 clients in leveraged OTC markets in the UK, while in Singapore, 10,000 was served.
As a result, the Singapore market presents an excellent profit per client statistic of £3687, which only compares better with the EMEA non-EU category at £4060.
According to Finance Magnates Intelligence, based on data from major FX/CFD brokers, over 50,000 retail investors actively speculated in the Singapore FX/CFD market in Q4 of last year.
“In recent years, turnovers of Foreign Exchange (FX) trading in Singapore have outweighed those of Japan and other ASEAN Countries. Additionally, a number of treasury departments of overseas financial/non-financial firms are attracted to Singapore, contributing to the increasing trading of Asian currencies in tandem with expanding goods and services trades between China and the ASEAN countries,” said Muthu Kumaran, the Chief Product Officer at FYNXT.
Staying on the topic of revenue per single client, let’s also take a look at the average deposits, withdrawals and the value of average first deposits into brokerage accounts.
The Average Singaporean Trader Deposits $1,700 on First Transaction
Data released by cPattern on deposits and withdrawals made by Singapore-based retail traders shows that for almost all of 2021, deposits remained at high levels and far exceeded average withdrawals.
Between January and October 2021, the average trader deposited more than $2,800 into his account each month. The average size of a single deposit during this period was almost $900, meaning that accounts were credited an average of three times each month.
On the other hand, the distribution of monthly total withdrawals and the average single withdrawal in a given month is very similar, staying at $930 and $960, respectively. It suggests that the average trader made only one withdrawal from his account for every three deposits.
“A few competitive asset management companies targeting the high-income customers are based in Singapore. From the perspective of the best execution practice, FX transactions pertaining to the asset management business have shifted to electronic trading to enhance transparency. This trend also contributes to increased FX turnover in Singapore,” Kumaran added.
The average first deposits (FTD) category, i.e., the first deposit into a new account for a single trader, also ranks high. The average over the reporting period was USD 1,743, while in some months, it reached almost USD 3,000.
For comparison, another economic tiger (from the European market) presents much worse FTD numbers. We are talking about Poland, described in a separate article, where the first deposit value averaged USD 268, and the median stood at USD 228.
Continuing our series of analyses in which we look at the retail Forex (FX) and contracts for difference (CFD) industries in individual countries, this time we visit the Asian continent, taking a look at Singapore. This culturally and linguistically diverse country, which has enjoyed complete independence since the 1960s, is developing rapidly and has an exciting and advanced financial market.
Singapore, One of Asia’s Four Tigers
Modern Singapore was founded in 1819 by Stamford Raffles as one of the trading posts of the British Empire. Singapore became an independent state in 1959, a few years later becoming a member of the federation of Malaysia. Two years later, it was expelled for ideological reasons, becoming a completely independent country.
Despite initial turbulence, the sovereign island city-state in maritime Southeast Asia grew rapidly and became one of the Four Asian Tigers, building its strength on foreign trade. It is currently ranked ninth in the world by the UN Human Development Index (HDI) and has the second-highest gross domestic product per capita (PPP) globally, projected to reach almost $108,000 in 2021.
At the same time, it is worth noting that Singapore is the only Asian country currently rated AAA by foreign rating agencies worldwide. It stands out as an important financial hub and tax haven, attracting many foreign investors and companies.
Among them are
Forex Forex Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest trading market by volume. According to the Bank of International Settlements (BIS) latest survey, the Forex market now turns over in excess of $5 trillion every day, with the most exchanges occurring between the US Dollar and the Euro (EUR/USD), followed by the US Dollar and the Japanese Yen (USD/JPY), then the US Dollar and Pound Sterling (GBP/USD). Ultimately, it is the very exchanging between currencies which causes a country’s currency to fluctuate in value in relation to another currency – this is known as the exchange rate. With regards to freely floating currencies, this is determined by supply and demand, such as imports and exports, and currency traders, such as banks and hedge funds. Emphasis on Retail Trading for ForexTrading the forex market for the purpose of financial gain was once the exclusive realm of financial institutions.But thanks to the invention of the internet and advances in financial technology from the 1990’s, almost anyone can now start trading this huge market. All one needs is a computer, an internet connection, and an account with a forex broker. Of course, before one starts to trade currencies, a certain level of knowledge and practice is essential. Once can gain some practice using demonstration accounts, i.e. place trades using demo money, before moving on to some real trading after attaining confidence. The main two fields of trading are known as technical analysis and fundamental analysis. Technical analysis refers to using mathematical tools and certain patterns to help decide whether to buy or sell a currency pair, and fundamental analysis refers to gauging the national and international events which may potentially affect a country’s currency value. Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest trading market by volume. According to the Bank of International Settlements (BIS) latest survey, the Forex market now turns over in excess of $5 trillion every day, with the most exchanges occurring between the US Dollar and the Euro (EUR/USD), followed by the US Dollar and the Japanese Yen (USD/JPY), then the US Dollar and Pound Sterling (GBP/USD). Ultimately, it is the very exchanging between currencies which causes a country’s currency to fluctuate in value in relation to another currency – this is known as the exchange rate. With regards to freely floating currencies, this is determined by supply and demand, such as imports and exports, and currency traders, such as banks and hedge funds. Emphasis on Retail Trading for ForexTrading the forex market for the purpose of financial gain was once the exclusive realm of financial institutions.But thanks to the invention of the internet and advances in financial technology from the 1990’s, almost anyone can now start trading this huge market. All one needs is a computer, an internet connection, and an account with a forex broker. Of course, before one starts to trade currencies, a certain level of knowledge and practice is essential. Once can gain some practice using demonstration accounts, i.e. place trades using demo money, before moving on to some real trading after attaining confidence. The main two fields of trading are known as technical analysis and fundamental analysis. Technical analysis refers to using mathematical tools and certain patterns to help decide whether to buy or sell a currency pair, and fundamental analysis refers to gauging the national and international events which may potentially affect a country’s currency value. Read this Term brokers and trading platforms that offer retail clients investing in contracts for difference.
Monetary Authority of Singapore (MAS) Regulates the FX/CFD Industry
Retail CFD trading in Singapore is fully legal, and local investors can use any broker of their choice, not just those located directly in the country. However, those who wish to provide their services locally must be accredited and licensed by the Monetary Authority of Singapore (MAS).
The regulator is one of the most active financial watchdogs in the world and is highly respected in the industry. This is why most big brokerage brands have their own MAS licenses. Among them are IC Markets, IG, Saxo Bank, CMC Markets, Interactive Brokers, Plus500, etc. At the moment, there are 39 different entities licensed as “Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading” in the country. Their complete list is available here.
Like many other jurisdictions around the world, Singapore has campaigned against high
leverage Leverage In financial trading, leverage is a loan supplied by a broker, which facilitates a trader in being able to control a relatively large amount of money with a significantly lesser initial investment. Leverage therefore allows traders to make a much greater return on investment compared to trading without any leverage. Traders seek to make a profit from movements in financial markets, such as stocks and currencies.Trading without any leverage would greatly diminish the potential rewards, so traders need to rely on leverage to make financial trading viable. Generally, the higher the fluctuation of an instrument, the larger the potential leverage offered by brokers. The market which offers the most leverage is undoubtedly the foreign exchange market, since currency fluctuations are relatively tiny. Of course, traders can select their account leverage, which usually varies from 1:50 to 1:200 on most forex brokers, although many brokers now offer up to 1:500 leverage, meaning for every 1 unit of currency deposited by the trader, they can control up to 500 units of that same currency. For example, if a trader was to deposit $1000 into a forex broker offering 500:1 leverage, it would mean the trader could control up to five hundred times their initial outlay, i.e. half a million dollars. Likewise, if an investor using a 1:200 leveraged account, was trading with $2000, it means they would be actually controlling $400,000, i.e. borrowing an additional $398,000 from the broker. Assuming this investment rises to $402,000 and the trader closes their trade, it means they would have achieved a 100% ROI by pocketing $2000. With leverage, the potential for profit is clear to see. Likewise, it also gives rise to the possibility of losing a much greater amount of their capital, because, had the value of the asset turned against the trader, they could have lost their entire investment.FX Regulators Clamp Down on Leverage Offered by BrokersBack in multiple regulators including the United Kingdom’s Financial Conduct Authority (FCA) took material measures to protect retail clients trading rolling spot forex and contracts for difference (CFDs). The measures followed after years of discussion and the result of a study which showed the vast majority of retail brokerage clients were losing money. The regulations stipulated a leverage cap of 1:50 with newer clients being limited to 1:25 leverage. In financial trading, leverage is a loan supplied by a broker, which facilitates a trader in being able to control a relatively large amount of money with a significantly lesser initial investment. Leverage therefore allows traders to make a much greater return on investment compared to trading without any leverage. Traders seek to make a profit from movements in financial markets, such as stocks and currencies.Trading without any leverage would greatly diminish the potential rewards, so traders need to rely on leverage to make financial trading viable. Generally, the higher the fluctuation of an instrument, the larger the potential leverage offered by brokers. The market which offers the most leverage is undoubtedly the foreign exchange market, since currency fluctuations are relatively tiny. Of course, traders can select their account leverage, which usually varies from 1:50 to 1:200 on most forex brokers, although many brokers now offer up to 1:500 leverage, meaning for every 1 unit of currency deposited by the trader, they can control up to 500 units of that same currency. For example, if a trader was to deposit $1000 into a forex broker offering 500:1 leverage, it would mean the trader could control up to five hundred times their initial outlay, i.e. half a million dollars. Likewise, if an investor using a 1:200 leveraged account, was trading with $2000, it means they would be actually controlling $400,000, i.e. borrowing an additional $398,000 from the broker. Assuming this investment rises to $402,000 and the trader closes their trade, it means they would have achieved a 100% ROI by pocketing $2000. With leverage, the potential for profit is clear to see. Likewise, it also gives rise to the possibility of losing a much greater amount of their capital, because, had the value of the asset turned against the trader, they could have lost their entire investment.FX Regulators Clamp Down on Leverage Offered by BrokersBack in multiple regulators including the United Kingdom’s Financial Conduct Authority (FCA) took material measures to protect retail clients trading rolling spot forex and contracts for difference (CFDs). The measures followed after years of discussion and the result of a study which showed the vast majority of retail brokerage clients were losing money. The regulations stipulated a leverage cap of 1:50 with newer clients being limited to 1:25 leverage. Read this Term in recent years. Eventually, the leverage level for FX instruments for retail investors was limited to 20:1 as decided in October 2019. Although accredited investors still have access to higher leverage (50:1), qualification is not easy.
A trader must have personal assets over $1.5 million or must hold more than SGD1 million in his pocket or earn more than SGD300,000 per year.
Singapore an Important Market for International Brokers
Financial figures released by major brokerage brands operating in markets around the world show that Singapore has been an important base in recent years in terms of both active client numbers and generated revenues.
This is confirmed, among others, by IG Group’s latest report summarizing its financial results for the first half of fiscal 2022 which ended 30 November 2021. While the UK, EU, EMEA and Australian markets dominate in terms of financial numbers, Singapore ranks fifth, delivering £36.7 million in revenue for the reported period (by comparison, the UK business brought the broker £157.2 million in revenue). This was quite a leap from the results for the first half of fiscal 2020 when revenue was £21.5 million.
At a time when profits generated by IG Group in Singapore are around four times smaller than those in the UK, the client base between the two jurisdictions is already more than five times smaller. IG Group served 51,800 clients in leveraged OTC markets in the UK, while in Singapore, 10,000 was served.
As a result, the Singapore market presents an excellent profit per client statistic of £3687, which only compares better with the EMEA non-EU category at £4060.
According to Finance Magnates Intelligence, based on data from major FX/CFD brokers, over 50,000 retail investors actively speculated in the Singapore FX/CFD market in Q4 of last year.
“In recent years, turnovers of Foreign Exchange (FX) trading in Singapore have outweighed those of Japan and other ASEAN Countries. Additionally, a number of treasury departments of overseas financial/non-financial firms are attracted to Singapore, contributing to the increasing trading of Asian currencies in tandem with expanding goods and services trades between China and the ASEAN countries,” said Muthu Kumaran, the Chief Product Officer at FYNXT.
Staying on the topic of revenue per single client, let’s also take a look at the average deposits, withdrawals and the value of average first deposits into brokerage accounts.
The Average Singaporean Trader Deposits $1,700 on First Transaction
Data released by cPattern on deposits and withdrawals made by Singapore-based retail traders shows that for almost all of 2021, deposits remained at high levels and far exceeded average withdrawals.
Between January and October 2021, the average trader deposited more than $2,800 into his account each month. The average size of a single deposit during this period was almost $900, meaning that accounts were credited an average of three times each month.
On the other hand, the distribution of monthly total withdrawals and the average single withdrawal in a given month is very similar, staying at $930 and $960, respectively. It suggests that the average trader made only one withdrawal from his account for every three deposits.
“A few competitive asset management companies targeting the high-income customers are based in Singapore. From the perspective of the best execution practice, FX transactions pertaining to the asset management business have shifted to electronic trading to enhance transparency. This trend also contributes to increased FX turnover in Singapore,” Kumaran added.
The average first deposits (FTD) category, i.e., the first deposit into a new account for a single trader, also ranks high. The average over the reporting period was USD 1,743, while in some months, it reached almost USD 3,000.
For comparison, another economic tiger (from the European market) presents much worse FTD numbers. We are talking about Poland, described in a separate article, where the first deposit value averaged USD 268, and the median stood at USD 228.
