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SGX’s Singapore Gold Kilobar Contract is World’s First Shariah Compliant Gold Futures

William Chin, Head of Metals and Bulk Commodities, Singapore Exchange, talks about Singapore Kilobar contract, about making Singapore Kilobar contract as world’s first Shariah compliant gold futures, the volume that has come since the launch of the contract in a candid interview with Debajit Saha, Editor, Bullion Bulletin, on the sideline of Asia Pacific Precious Metals Conference, 2017, Singapore.

Tell us about Singapore Kilobar gold contract. How is the response so far since its launch?

SGX launched the world’s first exchange-traded, physically delivered wholesale gold futures in October 2014, in partnership with the World Gold Council and the Singapore Bullion Market Association. Our Singapore Kilobar Gold Contract offers an option for investment and risk management, serving as a transparent and centralised Asian price-discovery platform for the gold market. Globally, about 60% of the precious metal is traded in Asia, with demand growing particularly in South-East Asia.

In 2015, we strengthened the contract’s specifications following extensive market feedback. In addition to extending trading hours and providing an arrangement where sellers can transfer away their short positions on delivery – a world first – we have also worked with participant banks to formalise OTC delivery of gold to alternative locations in Hong Kong and Bangkok. This is useful in building links for physical users of our contract who are active in these locations.

Are you looking to launch a 'new' Shariah compliant futures contract, or kilobar contract will be made Shariah compliant?

SGX has been driving innovation across our derivative offerings as the market evolves. In December 2016, the Singapore Kilobar Gold Contract became the world’s first and only Shariah-compliant gold futures – a development that strengthens Singapore’s position as an international centre for Islamic finance, and builds on our vision to develop a global trading hub for gold.

To date, about 8 tonnes of gold have traded on the contract – baby steps but an important series of footprints in evolution for a 300 year old market where “fixings” started a century ago.

Your views about the APPMC. How will it help the trade in the regions?

Given the fast-evolving regulatory climate and possibilities with new technological infrastructure, the APPMC is highly relevant as a platform to drive industry consensus, discuss key issues facing the industry, and promoting conversations and thought leadership. With Asia accounting for over 60% of physical gold trade, the conference will promote industry trade and conversations by bringing together key stakeholders, many of whom will be instrumental in shaping the gold landscape in this region in the years to come.

Disclaimer: Views are personal and not the views of the publisher.