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APEX: Leading Derivatives Innovation

By Asia Pacific Exchange

SBMA - Apex: Leading Derivatives Innovation

Established in 2018, Asia Pacific Exchange (APEX) and Asia Pacific Clear Pte. Ltd. (APEX Clear) are Singapore’s third regulated derivatives exchange and clearing house. APEX is regulated by the Monetary Authority of Singapore (MAS) and holds an Approved Exchange licence.

Eugene Zhu, founder and Chief Executive Officer (CEO) of APEX, is a prominent figure in the early development of the futures industry in China. He previously served as the CEO of Dalian Commodity Exchange (DCE) and China Financial Futures Exchange (CFEX). Leveraging Zhu’s expertise and Singapore’s stature as a global financial hub, APEX aims to establish itself as a leading venue for commodity and financial derivatives trading in Asia. Zhu’s visionary leadership has been instrumental in shaping APEX’s strategic direction and fueling its growth.

In recent years, APEX has expanded its suite of products, introducing innovative solutions such as the perpetual contract. This derivative departs from convention by allowing indefinite holding without fixed expiration dates, eliminating the hassle of rolling over positions to the next calendar contract. Another notable feature of the perpetual contract is the inclusion of funding rates, facilitating the exchange of overnight position borrowing costs between long and short position holders. This ensures that is no significant deviation between the derivative price and the spot price of the underlying asset over time. APEX takes pride in being among the first regulated exchanges to introduce the perpetual contract in the traditional derivatives space. Its popularity has surged due to its flexibility and ability to accommodate both short-term and long-term strategies.

Gold’s Economic Resilience

Gold has long historically served as a cornerstone of economic stability, revered as a reliable investment and symbol of wealth and prosperity. During periods of economic volatility and uncertainty, investors often turn to gold as a hedge against inflation and market volatility, drawn to its intrinsic value and stability. In a surprising turn of events in 2023, gold emerged as one of the top-performing assets, reaching a historic peak of US$2,078.40/oz on the final afternoon auction of the year. This surge was fuelled by heightened geopolitical tensions and a pessimistic global economic outlook, reigniting interest in gold as a safe- haven asset.

Closer to home, Singapore’s central bank ranked third globally in gold purchases between January and September 2023, following closely behind China and Poland, according to World Gold Council (WGC) data. Globally, central banks continued to accumulate gold at an unprecedented pace, driving demand in the third quarter of 2023 to 1,147 tonnes – and 8% increase over the five-year average.

Why Gold Perpetual Futures?

APEX Gold Perpetual Futures were introduced to address concerns among gold spot traders regarding the prevalence of unregulated brokers in over-the-counter (OTC) transactions. These gold perpetual futures, offered by a regulated exchange, provide a safer avenue for investors to engage in gold trading. As a regulated exchange in Singapore, APEX adheres to rigorous standards set by the MAS, implementing strict protocols to minimise counterparty risk arising from broker insolvency. Overall, the introduction of gold perpetual futures enhances the security and stability of gold trading, providing greater confidence and assurance to investors seeking an alternative to gold spot trading.

Contract Specifications

In May 2023, APEX launched Gold Troy Ounce Perpetual Futures in denominations of:
In May 2023, APEX launched Gold Troy Ounce Perpetual Futures in denominations of:

Contract Sizes

The introduction of different contract sizes is particularly relevant amid an observed increase in retail participation. It enables broader client participation and caters to diverse trading preferences, reflecting the evolving dynamics of the market.

Perpetual Contract

APEX’s rollout of gold perpetual contracts in 2023 was timely, reinforcing its position as a pioneering regulated exchange to introduce a range of perpetual contract products since 2021. Diverging from traditional futures contracts, perpetual contracts do not have expiration dates, eliminating the need to rollover positions to the next calendar contract. This unique attribute empowers market participants to capitalise on gold positions with the flexibility to maintain their positions indefinitely, allowing for a more strategic and long-term approach to gold trading.

Cash Settlement

The gold contracts, denominated in USD, offer market participants convenience, cost-effectiveness and flexibility in alignment with their investment objectives. They also expose market participants to gold spot market movements and price fluctuations. More market participants now have the opportunity to engage with gold not merely as a physical asset but also as a dynamic element in the futures trading space.

London Bullion Market Association (LBMA)

The contract is settled daily using the LBMA Gold AM prices, ensuring fair mark-to-market valuation. Administered by ICE Benchmark Administration Limited, the LBMA Gold Price benchmark represents the standard for unallocated gold prices in London.

Swap Rate

A distinctive feature of APEX Gold Perpetual Futures is its zero-spread swap rate. This rate, also known as an overnight financing rate or rollover rate, represents the interest paid or earned for holding a position overnight. The term “zero spread” indicates that APEX does not apply an additional spread or mark-up to the swap rate, which is aligned with prevailing market interest rates. This introduction aims to compensate market participants for the opportunity cost associated with holding a position overnight, as it is applied uniformly to all open positions at the close of each trading session.

Leverage

Margin requirements for the gold contracts are continuously monitored to maintain a fair and effective risk management approach, particularly during periods of volatile price fluctuations. As of the end of February, the prevailing margin rate slightly exceeds US$50/contract, offering a leverage of about 40 times. This feature enhances the appeal of trading by enabling market participants to efficiently utilise their capital.

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Apex: Leading Derivatives Innovation

Applications in the Gold Market

Derivative contracts are versatile tools that serve various functions in the gold market.

Risk Management

In today’s dynamic financial landscape, derivatives play a crucial role in risk management strategies, particularly for entities vulnerable to fluctuations in gold prices. Acting as a safety net, derivatives effectively mitigate potential losses by hedging against adverse movement in gold prices. The use of LBMA Gold AM prices for daily settlement ensures that mark-to-market processes are executed with a fair and transparent benchmark. This reliable pricing mechanism facilities equitable contract settlements and acts as a deterrent against market manipulation. It enables market participants to make well-informed decisions about their positions and adeptly manage the impact of sudden market fluctuations.

Arbitrage

Market inefficiencies create opportunities for arbitrage, allowing market participants to capitalise on price disparities between different gold markets or products. This approach enables traders to maintain a neutral stance on market direction, focusing on exploiting price differentials. Additionally, market participants can optimise their portfolios more cost-effectively by taking advantage of the zero-spread swap fee. This is particularly beneficial for extended positions held over a prolonged period, regardless of direction.

Speculative

Derivative contracts provide speculative traders with a platform to benefit from potential volatility in the gold price, enhancing returns during favourable market conditions. This flexibility allows traders to navigate both bullish and bearish scenarios seamlessly. With no expiration date in perpetual contracts, extended holding periods are permitted, allowing market participants to capitalise on potential market trends without the necessity of owning the physical gold asset.

Gold

Gold’s Promising Future

Amid a shifting financial landscape, gold remains a beacon of stability and resilience that offers a hedge against inflation and market fluctuations. Gold’s intrinsic value and historical role as a wealth preserver continue to attract investors amid persistent global economic uncertainties. Moreover, advancements in financial innovation, such as the introduction of APEX Gold Troy Ounce Perpetual Futures, provide investors with new avenues to engage with the gold market. These innovative derivatives offer flexibility, liquidity, and transparency, empowering investors to navigate the intricacies of gold trading with confidence.

For more information, please visit: https://www.asiapacificex.com/

DERIVATIVE CONTRACTS ARE VERSATILE TOOLS THAT SERVE VARIOUS FUNCTIONS IN THE GOLD MARKET.

ADVANCEMENTS IN FINANCIAL INNOVATION, SUCH AS THE INTRODUCTION OF APEX GOLD TROY OUNCE PERPETUAL FUTURES, PROVIDE INVESTORS WITH NEW AVENUES TO ENGAGE WITH THE GOLD MARKET.

Disclaimer

All such information/material is provided for informational purposes only and is not to be considered as an offer or a solicitation to trade or invest in the specific financial instruments nor as advice or recommendation with respect to such financial instruments. Use of and/or reliance on the provided information/material is entirely at your own risk. Financial instruments are subject to significant investment risks, including the possible loss of the principal amount invested. Past performance of financial instruments is not indicative of their future performance. Any forecast, prediction or projection in the information/material is not necessarily indicative of the future or likely performance of the financial instrument. All values quoted are indicative and subject to change and examples (if any) provided are for illustrative purposes only. Whilst the information/material provided has been obtained from sources believed to be reliable, including third party sources, and may include links to other resources/websites which are provided for your convenience only, APEX makes no representation, warranty, guarantee or endorsement in relation to such information/material/resource/website (including to its completeness, accuracy, suitability, copyright compliance, legality) and expressly disclaims any and all responsibility and liability for any kind of loss or damage resulting from or in connection with this information/ material/resource/website (including any error, omission, incompleteness, inaccuracy, non-compliance, use or reliance). Participants are reminded to seek their own independent professional advice before making any investment or trading decisions. The information/material shall not be reproduced, republished, uploaded, linked, posted, transmitted, adapted, copied, translated, modified, edited or otherwise displayed or distributed in any manner without APEX’s prior written consent.

This material has not been reviewed by the Monetary Authority of Singapore.

BART MELEK

BART MELEK has over 20 years’ experience analysing precious metals, base metals, energy, financial markets, as well as key economies. He has worked closely with commodity, equity and FX trading desks around the world, and has several forecasting distinctions and top global rankings. Bart contributes to the TD Securities strategic view on commodity, various other markets and macroeconomics. Bart is also a sought-after media commentator. Before joining TD, he held senior roles in equities, commodities and risk.

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Singapore Bullion Market Association Secretariat-Lee-Jia-Yi

Lee Jia Yi

OPERATIONS & ADMIN EXECUTIVE
Before joining SBMA, Jia Yi worked as an Admin & Reporting Officer in her previous role. She holds a Diploma in Business & Social Enterprise from Ngee Ann Polytechnic. Jia Yi is responsible for managing and maintaining physical and digital files in SBMA, supporting invoicing processes, reconciling receivables and payables, coordinating meetings and conferences. Additionally, she will provide support to the team and assist the Business Director in managing the Association’s office operations and general administrative activities.

SECRETARIAT SBMA-Emily-Oh

Emily Oh

OPERATIONS & ADMIN EXECUTIVE
Emily Oh is the Operations & Admin Executive, a seasoned professional who values teamwork and effective communication. She is skilled at adapting to new challenges and takes a proactive and resourceful approach to every task. Before joining SBMA, Emily had experience coordinating international travel arrangements and spearheading community initiatives. Her role at SBMA will be providing operational and administrative support for projects and other matters to the team.

SECRETARIAT SBMA Clara-Chang

Clara Chang

MARKETING & COMMUNICATIONS EXECUTIVE
Clara Chang joins SBMA as the Marketing & Communications Executive, enriching the team with her extensive experience in content creation, social media management, and digital marketing. Prior to joining SBMA, Clara held the position of Marketing Executive at her previous job. She holds two bachelor’s degrees from the University at Buffalo, one in International Trade and another in Geographical Information Science. Her core duties will include maintaining the SBMA website, managing the quarterly Crucible newsletter, among other responsibilities.

SBMA Committee-Photo-john-levin

Mr John Levin

Global Metals
TD Securities
John Levin is the Head of Metal Sales & Trading – APAC at the Toronto Dominion Bank’s Singapore office. Prior to this role, he devoted seven years to leading precious metal sales for the ANZ banking group in his home country, Australia. Notably, from 2009 to 2011, John played a significant role on the management committee of the London Bullion Market Association while serving as the Head of Precious Metals Sales for HSBC Global Banking and Markets in the UK.

SBMA Secretariat-Fabian-Lew

Fabian Lew

MARKETING & COMMUNICATIONS OFFICER

Fabian was a Business Development and Marketing Associate before joining SBMA. He graduated from Singapore Management University with a Bachelor’s degree in Economics.

He has joined SBMA since February, 2022.

SBMA-margare-secretariat

Margaret Wong

BUSINESS DIRECTOR

Margaret Wong, Business Director at SBMA (Singapore Bullion Market Association), brought valuable experience from her previous role at the World Gold Council (WGC). Her tenure at WGC provided her with extensive exposure to the gold community in Singapore and the broader region. This background has been instrumental in establishing strong working relationships within the industry.

Margaret’s role at SBMA encompasses a diverse range of responsibilities. She oversees office management, business support processes, finance, and administrative functions essential for the smooth operation of the team and management committee. Additionally, Margaret handles membership matters, member communications, and addresses public inquiries related to SBMA.

One of Margaret’s key responsibilities is coordinating with the Event Management Company for SBMA’s prestigious annual event, the Asia Pacific Precious Metals Conference. This flagship conference plays a crucial role in the industry, making her involvement pivotal in its success.

Described as resourceful and self-motivated, Margaret Wong brings a wealth of skills and experience to her role at SBMA, ensuring efficient operations and effective engagement within the precious metals community in Singapore and beyond.

SBMA-Albert-secretariat

Albert Cheng

Chief Executive Officer

Albert Cheng joined the World Gold Council in March 1993 as a Regional Manager, becoming Managing Director, Far East in 2003. He retired at the end of March 2015 and was subsequently named its Advisor. He has also been an International Advisor to the Shanghai Gold Exchange since 2002.

His marketing career began with Dentsu Young & Rubicam, Hong Kong in the early 80’s. He began gold marketing in July 1985 when he joined the Royal Canadian Mint as a Regional Manager for Southeast Asia.

He was appointed honorary CEO of SBMA in November 2015. He is responsible for the success and strategic development of SBMA, represents the interests of the Association, and is responsible for all the legal and regulatory aspects of the work of the Association. He is the primary contact for regulators and government bodies on bullion market development.

Ms Pawan Nawawattanasub

Ms Pawan Nawawattanasub

CEO
YLG Bullion Singapore Pte Ltd

Pawan is the CEO of YLG Bullion Singapore and founder of YLG Bullion International. She has almost 40 years of experience in the jewellery industry and established YLG in Thailand in 2003. In 2012, she brought YLG to Singapore. She sits on the Board of Directors of the Thailand Gold Traders Association, the Thailand Futures Exchange’s Arbitration Committee, and the Rotary Bangkok committee. She holds a master’s degree in Political Science.

SBMA-Shaokai-Fan

Mr Shaokai Fan

Head of Asia-Pacific (ex China) and Global Head of Central Banks
World Gold Council
Shaokai Fan is the Global Head of Central Banks at the World Gold Council, responsible for advising governments on gold matters, and enhancing the gold market through engagement, dialogue, and thought leadership. He works directly with central banks and sovereign wealth funds on investment considerations. Prior to this position, Shaokai held multiple roles at Standard Chartered Bank, including Director for Asia Strategic Initiatives and Associate-Director for Public Sector coverage. Shaokai holds a Masters of Public Administration from Columbia University and the London School of Economics, and an undergraduate degree in finance and economics from New York University.

SBMA-Committee-Alan-Liew

Mr Alan Liew

Head of Bullion & Commodities Trading
United Overseas Bank Limited
Alan is Head of Bullion and Commodities Trading for Group Trading in Global Markets, United Overseas Bank (UOB). Alan joined UOB and started the bank’s commodities trading business in 2014, previously he spent eight years in Standard Chartered Bank (SCB) trading both precious and base metals. During his tenure at SCB, he obtained the SGE gold trader licence and was part of the pioneering team for the SGE business and the FX quantitative trading team. Prior to trading, he worked for Monetary Authority of Singapore in the Financial Risk Management Division. He holds a BSc (Hon) in Computer Science at National University of Singapore and a MSc in Financial Engineering at Nanyang Technological University.

SBMA-Committee-Nikos

Mr Nikos Kavalis

Managing Director
Metals Focus Singapore Pte Ltd
Nikos Kavalis is a founding partner of Metals Focus. He has over 20 years of experience in precious metals, having previously worked for the Royal Bank of Scotland and GFMS. Since September 2019, Nikos has been based in Singapore, where he also runs the local subsidiary of Metals Focus.

SBMA-Committee-khun nuttapong

Mr Nuttapong Hirunyasiri

CEO
MTS Gold Global Trading Pte Ltd
Nuttapong Hirunyasiri is the CEO of MTS Gold Group, one of Thailand’s top 10 companies and top 3 bullion companies. He started MTS Gold Group’s first overseas office in Singapore and has been expanding the group business internationally. He focuses on product development and innovation for gold investment, with the aim of being a leader in providing the full suite of gold investment services in the ASEAN region.

SBMA Committee-Photo-Raman-Walia

Mr Raman Walia

Executive Director, Head of Commodities Sales – APAC
JP Morgan Chase Bank N.A.

Raman is Executive Director and Head of Commodities Sales, APAC, for J.P. Morgan. He joined JPMorgan in 2008 in New York, moved to Singapore in 2011, and helped expand the precious metals business in the region. Raman has an MBA from Cornell University, and likes to travel in his spare time.

SBMA Committee-Photo-Andrew-Clarke

Mr Andrew Clarke

Head of Brink’s Global Services
Brink’s Global Services Pte Ltd

Andrew Clarke is the Head of BGS (Brink’s Global Services) for Singapore, Indonesia, Malaysia and Brunei. He has held various leadership positions throughout his career in secure logistics and risk management with Brink’s, which started in Hong Kong in 2010. Andrew relocated to Singapore in 2018 to expand the precious metals line of business along with Brink’s portfolio of services and industries.

SBMA Committee-Photo-Kazuya-Naoki

Mr Kazuya Naoki

Head of Metals, Asia
ICBC Standard Bank Plc, Singapore Branch

Kazuya (Kaz) Naoki is the Head of Metals, Asia of ICBC Standard Bank in Singapore and is responsible for the precious & base metals sales and trading in the region. He joined Standard Bank Plc Tokyo Branch in 2008 and was relocated to its Singapore Branch in 2013 whose controlling stake was acquired by the Industrial and Commercial Bank of China in 2015. Prior to joining Standard Bank, Kaz spent 11 years focusing on commodity trading and risk management with Mitsui & Co in Tokyo, Sydney and London. Kaz has been serving on the SBMA Management Committee since 2016.

SBMA Committee-Photo-Vinh-Nguyen

Mr Vinh Nguyen

Head of Precious Metals, Asia
StoneX APAC Pte Ltd

Vinh Nguyen joined StoneX Group in Singapore at the beginning of 2008 and responsible for its APAC precious metals activities since 2019 until now.

SBMA Committee-KL-Yap

Mr KL Yap

General Manager, Singapore Refining Business Unit
Metalor Technologies (Singapore) Pte Ltd
KL YAP is the General Manager of Metalor Technologies (Singapore) Pte Ltd’s Singapore Refining Business Unit. He joined Metalor in 2013, initially in Refining Sales. In 2014, he became Refining Business Unit Manager, leading the development of a new precious metal refinery. KL was Vice Chairman of SBMA from 2017 to 2021, now serving as Chairman. With a degree in business commerce, finance, and marketing, he brings prior experience from refinery and heavy industries.