SINGAPORE SAID TO BE CONSIDERING FUTURES EXCHANGE FOR COMMODITIES

SINGAPORE SAID TO BE CONSIDERING FUTURES EXCHANGE FOR COMMODITIES

Singapore is drawing up plans for a futures exchange that will list commodities traded in this region, rubber industry sources said.

The Trade Development Board, the Rubber Association of Singapore and the Singapore International Monetary Exchange are believed to be involved in discussions to set up the exchange, sources told Knight-Ridder Financial News. But they noted the talks are only at a conceptual stage and nothing has been finalized.The exchange is targeted to start as early as September, with rubber tipped to be the main contract, they said.

Specialization could be the key behind setting up a separate commodities futures exchange from Simex, partly due to the diverse nature of the different products involved, they said. They estimated that the final goal is for Simex to concentrate on financial futures while the proposed exchange will list strictly commodities.

One trader called the plans for the exchange "part of promoting Singapore as an international commodities trading center."

The Trade Development Board declined to comment on plans for the commodities futures exchange, while the RAS said it was premature to release any information since discussions are only at an initial stage.

But rubber industry sources said the shifting of Simex's fuel oil futures contract (currently Simex's only energy futures contract) to the proposed exchange when it is set up has been discussed, but the matter has not been decided.

''Without any other commodity except rubber, it (the exchange) may not take off," one source said.

Other sources said coffee and pepper futures may also considered.

But the Singapore exchange is unlikely to offer other products available in Malaysia's Kuala Lumpur Commodities Exchange besides rubber, commodities traders said.

Apart from palm oil and rubber, the KLCE currently also lists tin, palm olein and cocoa futures.

''(The Singapore market) should not duplicate the KLCE, or else it's a waste of time," stressed a palm oil trader here. He said he doubted the Singapore exchange will list palm oil futures, since the contract at the KLCE is already established and there are more players in Malaysia than in Singapore.

Another major issue to be ironed out is the method of trading for the proposed exchange.

An open-outcry system, which is used on the Simex trading floor, is among the options. But this means that the well-accustomed traditional ''whispering" method of trading used in the rubber trading community could be at stake, industry sources said. Under the "whispering" method, deals are struck privately, over the telephone or through personal meetings between the parties concerned.

''The rubber community thinks the present system is a better system

because the number of players is limited and they don't want their identities revealed," according to a source.

Moreover, the KLCE rubber futures contract has been dormant for several years and some traders blame its demise on the open-outcry method of trading. There could thus be some resistance to trading rubber futures here in the same way, rubber traders said.