SGX acquires HC to boost price discovery of physical rubber

Rick Steves

SGX and HC will work closely to develop pricing indices based on the benchmark SICOM prices to reflect a range of origins and grades of rubber.

The Singapore Exchange (SGX) has taken a strategic stake in HeveaConnect (HC) as it aims to strengthen its role as a price discovery center for physical rubber.

HC provides pricing granularity of various grades and origins of rubber traded in the physical market, by publishing basis indices over the SICOM benchmark.

Founded in 2018, HC digitalizes the natural rubber supply chain while providing data-backed services for the industry. The solution allows customers to link key information regarding quality, traceability and sustainability to the physical rubber that is traded on the platform.

As of end 2021, 15 unique participants comprising of producers, traders and consumers have transacted over 450,000 MT of natural rubber of Indonesian, Malaysian and Thai origin on the platform.

Pricing indices based on the benchmark SICOM

Trading on HC is bilateral and confidential. SGX provides market neutrality by providing confidentiality, guardianship and performs a custodian role by being the sole and independent owner of trade data on HC.

SGX will maintain the complete set of trade data on the HC Platform for a minimum of 7 years as per the SGX’s data retention policy.

Trade data will be transferred to SGX on a daily basis, while still being available on the HC Platform for a limited period of 13 months for the purpose of allowing participants to complete transactions and review their own historical data before it is entirely removed from the HC Platform.

Parties outside of the trade and other HC shareholders will not have access to the trade data. While the data exists on the HC Platform, access to this data by HC staff is strictly limited to authorised persons, and any such access is logged.

SGX will thus provide greater transparency of robust pricing for various grades and origins of rubber. As a provider of global pricing benchmark for natural rubber, SGX will introduce indices that enable granularity in rubber pricing that is integral to the management of basis risks in physical rubber trading.

SGX and HC will work closely to develop pricing indices based on the benchmark SICOM prices to reflect a range of origins and grades of rubber.

The index methodology will incorporate data from anonymized trades registered on the HC Platform. Data cannot be reverse-engineered to a specific participant or trade, the exchange explained. The price index may allow players to gain insights into market pricing and to more accurately price long-term contracts (LTCs).

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