German exchange group Deutsche Boerse is revamping its Asian business with the launch of its European Energy Exchange (EEX) in Singapore, looking to boost its business in the world's fastest growing commodity markets.
Deutsche Boerse, which has global ambitions for EEX, said it would rebrand its Singapore-based subsidiary Cleartrade Exchange (CLTX) as EEX Asia, offering futures contracts on freight and seaborne commodities such as fuel oil and iron ore.
German-based EEX is Europe's biggest bourse for trading power and also a leading exchange for natural gas, coal and carbon trading.
"We have the ambition to become a global commodities exchange," said Egbert Laege, EEX Group board member and its head of global commodities.
In 2016, EEX Group bought CLTX, which deals in commodities like iron ore and fuel oil, to get a foothold in Asia, which is by far the world's biggest and fastest growing commodity and energy market.
Last year, EEX bought US power and natural gas bourse Nodal Exchange.
"The acquisition of CLTX was the first step. Then last year, Nodal was the next step," Laege told the Reuters Global Commodities Summit series of interviews that takes place this week.
EEX Group will keep its Cleartrade brand alive as a platform handling support for commodities traded outside exchanges, known as over-the-counter (OTC) markets.
EEX Asia will initially focus on expanding its freight offerings.
"It's the freight market we find most interesting, especially in Asia. It's a key facilitator for global trade ... and there's a huge overlap of Asian and European freight clients," he said, speaking to Reuters while attending the Singapore International Energy Week (SIEW).
"The next step will be iron ore."
Growing its dry-bulk business will put EEX Asia in competition with the dominant bourse in this field, the Baltic Exchange, which was bought by Singapore Exchange (SGX) in 2016.
"In some of our offerings, we will be competing with SGX's offerings, for sure," said Laege.
Power And Gas Not Quite There In Asia
In Europe, EEX started off as an electricity exchange, before branching out into the main fossil fuels that fire power stations: thermal coal and natural gas.
While it has established some links in Asia, including early product design projects with the Japan Electric Power Exchange (JEPX), Laege said electricity was not a priority for EEX Asia at this stage.
"As an exchange, you cannot front-run a market. There needs to be a threshold market size and liquidity first, and in Asia's (power and gas markets) we're not quite there yet."
This was also the case for the booming liquefied natural gas (LNG) market.
"While it is true that LNG demand is growing, you have a lack of standardized delivery contracts," Laege said, with higher standardization a prerequisite for an LNG exchange product.Despite some attempts to chance the status quo, "it will have to be seen whether you'll ever have such standardization (in Asian LNG) as you have in US and European natural gas markets," he added.