The city-state's local bourse Singapore Exchange will be commencing the trading of Daily Leverage Certificates (DLCs) on Asian indices beginning on July 17.
By doing so, SGX is the first in Asia to offer trading in DLCs, allowing Specified Investment Products (SIP)-qualified investors to gain fixed leveraged exposure to key Asian indices.
According to a statement released by SGX, DLCs exist without implied price volatility, margin calls, time decay, and features that impact pricing for options.
These certificates are widely received by investors in Europe where they are also called constant leveraged products or factor certificates.
The first batch of DLCs issued by Societe Generale will consist of 10 products ranging from Long and Short DLCs that offer fixed leverage of three or five times the daily returns of the underlying indexes. These are designed to be traded predominantly on an intra-day basis and has the flexibility to benefit from the rising and falling markets.
SGX Head of Equities Chew Sutat said DLCs are one of the fastest growing listed structured products in Europe since 2012.
"This first-of-its-kind offering in Asia will provide investors in the region an exchange-traded instrument to capture leveraged returns on daily market moves. We welcome and look forward to such offerings that meet the evolving needs of investors in Asia," he said in a statement to the media.
Meanwhile, Keith Chan, Head of Cross Asset Listed Distribution at Societe Generale's Global Markets in Asia Pacific, noted that this could really do well in a market such as Singapore.
"Societe Generale is excited to be the first bank in Asia to bring DLCs to Singapore and the region. Since its emergence in 2012, DLCs have become the fastest growing listed products by volume in Europe and we see strong appetite for leveraged products from Asian investors. Our recognised leadership in equity derivatives and our solid experience with DLCs in Europe make us an ideal partner with SGX to introduce this new product to Singapore," he commented.
