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SGX Launches the MSCI Singapore Net Total Return Index
Traders Magazine Online News, August 24, 2017
Singapore Exchange (SGX) launched the MSCI Singapore Free Net Total Return (USD) Index to complement its existing suite of Asian Net Total Return Futures contracts.
The MSCI NTR Index Futures Contracts offer market participants exposure to a different set of indices based on net total return (NTR) indices. Net total return indices consider price movement of the constituent stocks as well as dividend, interest, rights offerings and other distributions (net of tax) realized over a period of time, whereas price return indices only consider price movements of constituent stocks. As a result, market participants trading the MSCI NTR Index Futures contracts do not need to make assumptions on dividend distribution as dividends are re-invested on a net-tax basis following the established MSCI methodology.
With the addition of these new contracts, SGX is now the only exchange in Asia to offer both price return and net total return versions of MSCI equity index futures contacts, thereby providing the widest range of derivatives to investors seeking to access Asia’s four largest emerging markets – China, India, Indonesia and Taiwan, which collectively represent over 50% of the MSCI Emerging Market NTR Index – and the developed market of Singapore.
Asia continues to be a key driver of the global economy with the Asian Development Bank (ADB) estimating a growth rate for 2017 of 5.7%. This growth rate is expected to result in greater demand for derivatives products that meet the evolving financial needs of global investors.
Alternative listed solutions to OTC equity index swaps
The MSCI NTR contracts are designed to meet increased demand for clearing solutions amid a changing global regulatory landscape for uncleared derivatives. SGX futures contracts deliver a cost-effective platform for over-the-counter (OTC) and buy-side participants to trade and clear NTR products in the form of futures in Asia. Investors will be able to mitigate capital costs and collateral usage with central clearing, and also benefit from portfolio efficiencies across SGX products in the form of margin offsets.
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