SGX embarked on the development of a DRAM futures contract after feedback from semiconductor chip manufacturers, users and other players in the electronics industry concerned about the need to manage risks following the high volatility in the price of DRAM chips over the last few years. At the same time, the exchange believes the futures contract will present unique opportunities for trading and arbitraging by players in the financial and futures industries.
"Introducing the world's first DRAM futures is a result of leveraging on our expertise and established infrastructure for financial derivatives instruments. It is in line with SGX's strategy to create cost-effective solutions for tomorrow's market, today," said Ang Swee Tian, president of the exchange.
The initiative is supported by the Infocomm Development Authority of Singapore (IDA) and the International Enterprise Singapore (IE Singapore).
SGX has also brought on board Semicon Exchange (SemiconX), a semiconductor trading platform provider, as an industry advisor to also assist the exchange in communicating with the semiconductor industry.
Subject to regulatory approval, the DRAM futures contract will be traded on the SGX derivatives market's electronic trading system (SGX ETS). The contract specifications, including the type of chip, will be finalised after further consultation with the industry. Meanwhile, the exchange expects the contract to be denominated in US dollars, with each contract sized at 10,000 pieces of DRAM with a value of approximately $70,000.