Singapore Exchange to develop price index for physical NR

Singapore – The Singapore Exchange (SGX) has extended its collaboration with natural rubber (NR) digital trading platform HeveaConnect (HC) to develop price index for physical natural rubber.

The move follows SGX’s acquisition, last March, of a minority stake in HeveaConnect, a digital trading platform claimed to be used by seven of "the top 15" tire makers in the world. 

In a statement 1 March, SGX said it is now collaborating with the platform publishing basis indices over the SICOM benchmark for various grades and origins of rubber traded in the physical market.

Broadly, the index methodology will incorporate data from anonymised trades registered on the HC Platform that cannot be reverse-engineered to a specific participant or trade.

For the index to be robust and fit for purpose, SGX said, a diverse range of participants along the rubber value chain, as well as “acceptable levels of transacted volume” will be used.

This will provide “an accurate and representative reflection” of market prices.

“The price index may allow players to gain insights to market pricing and to more accurately price long-term contracts,” SGX added.

SGX said the partnership with HC will enable it to provide "greater transparency of robust pricing" for various grades and origins of rubber through digitalisation.

The digitalisation drive, it said, “allows participants to express their physical rubber trading views reflecting prevailing physical prices and market conditions.”

“The aim of the indices is to enable granularity in rubber pricing that is integral to the management of basis risks in physical rubber trading,” it added.

According to SGX, transactions on the HC platform are bilateral and provides assurance to users that their confidential trade data is only accessible to the two parties of the transaction.

SGX also aims to provide market neutrality by providing confidentiality and guardianship and by acting as 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 seven years as per the SGX's data retention policy,” it said.

HC will transfer all trade data to SGX on a daily basis, and this data will be available on the HC platform for a limited period of 13 months.

The timeframe will allow participants to complete transactions and review their historical data before they are “entirely removed” from the platform.

Parties outside of the trade and other HC shareholders will not have access to the trade data, according to SGX.

Founded in Singapore in 2018, HeveaConnect is technology provider with the aim to digitalise the NR supply chain while providing data-backed services for the industry.

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

According to SGX, the group includes seven of the top 15 tiremakers in the world and three of the top five Indonesian rubber exporters.