Distinguished guests,
Ladies and gentlemen,

1   Good morning.  It is my pleasure to join you today at FIA’s 5th Annual Asia Derivatives conference.  To all our foreign guests, I bid you a very warm welcome and I hope that you are having a pleasant stay in Singapore. 

2   Over the past few months, there have been encouraging signs that the worst may indeed be over for the global economy.  The financial markets and real economy indicators are showing signs of stabilization, the US economy is recovering from a deep recession, and growth has returned to many countries in Europe and Asia.  Nevertheless, downside risks remain significant as the growing indebtedness of official sectors, high unemployment rates and weak consumer demand continue to weigh down on the nascent recovery in the global economy.  The initial market reaction to news on Dubai World’s debt suspension demonstrates the ongoing fragility of the financial system recovery.  MAS continues to monitor developments in Dubai which we do not expect to adversely affect Singapore's financial stability. 

3   Despite the turbulence in 2008, the global futures and options industry has continued to grow.  The total number of futures and options contracts traded on the 69 exchanges tracked by the Futures Industry Association (FIA) rose 13.7% in 2008 .  But the industry has not been spared in the crisis and the current pace of growth is a far cry from 30% growth in 2007 and 19% growth in 2006.  Nonetheless, the exchange traded markets have exhibited greater resilience than the over-the-counter or OTC markets during the crisis, largely attributed to the heightened counterparty risks in OTC trades.  As such, there is now widespread consensus on the need to reduce systemic risk and enhance transparency in the OTC derivatives markets in order to achieve a more stable and resilient financial system.

4   For the exchange derivatives industry, Asia continues to be the region of growth.  Trading volumes on Asian derivatives exchanges has continued to grow in the past two years.  According to the BIS, turnover by contracts on Asian exchanges grew by 24% in the first two quarters of 2009, when compared against the same period in 2008, while the global turnover figures for the same period have decreased by 8%.  In many aspects, Asia has not been hit as hard as other parts of the world by this crisis and we should take this opportunity to further strengthen and grow the Asian derivatives markets.
 
5   As you are most aware, trading in Asia is spread across derivatives exchanges with differences in regulations and technology.  This lack of standardization continues to pose as the structural barrier for industry growth.  Recognizing this, efforts are underway to integrate the markets.  One such initiative is the Memorandum of Understanding signed earlier this year to form an ASEAN electronic trading link which would enhance the competitiveness of Asian capital markets.  Just last week, at the Asian Bond Market Summit, Asian fund managers and investors were calling for creation of more hedging instruments and platforms to facilitate trading of Asian local currency bonds. 

6   Another development we are seeing is the establishment of central counter party or CCP platforms to reduce counterparty risks and systemic risks in the OTC markets.  In the region, we have seen that Japan, Hong Kong, Korea, and China being the latest, each announced plans to develop CCP platforms for the clearing of OTC financial derivatives.  While each CCP platform has a unique role and serves niche segments of the markets, given the global nature of OTC derivatives and the region's interdependence on trade and financing, it would be beneficial for the industry to explore ways of working together.  For instance, establishment of interoperability frameworks amongst CCP platforms would be very useful for enhancing market stability and minimizing systemic risks in times of stress. It would also allow market participants flexibility in choosing CCP platforms to clear trades with.  Global industry bodies such as the FIA and ISDA could play a role in creating an industry-wide approach for the establishment of such interoperability arrangements through the harmonization of standards and documentation. These efforts could help to strengthen the efficiency of clearing and improve transparency in the global and Asian OTC derivatives markets.

7   The Singapore government recognizes that the current crisis presents opportunities to further strengthen our competitiveness as an Asian financial centre.  Strategic committees have been set up to identify initiatives to strengthen Singapore’s value as a vibrant global economic node in the heart of Asia.  To build on Singapore’s strengths as the world’s 5th largest OTC derivatives trading hub, Asia’s 2nd largest FX trading center and the regional energy price discovery center, we welcome various financial sector initiatives such as the upcoming launch of the Singapore Mercantile Exchange (SMX) and the reported interest by the Singapore Exchange to develop a central counterparty clearing facility for OTC financial derivatives.  These initiatives would serve to enhance Singapore’s unique role as a commodities trading hub and a regional risk management centre. 

8   Lastly, conferences such as this are critical as they provide a platform for industry participants and regulators, to discuss new ideas and to explore new ways of tackling structural challenges and opportunities.

9   On that note, I hope that you will find the session in Singapore a productive one and I look forward to FIA returning to Singapore on a more regular basis.  Thank you.