SINGAPORE, March 1, 2022 /PRNewswire/ -- The Singapore Exchange (SGX) has taken a strategic stake in HeveaConnect (HC) on 3 March 2021. SGX as the provider of the global pricing benchmark for natural rubber, aims to strengthen its role as a price discovery centre through collaborating with HC to provide pricing granularity of various grades and origins of rubber traded in the physical market, by publishing basis indices over the SICOM benchmark.

Trade Data Governance and Independence

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

As the sole owner of trade data on the HC Platform, 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. 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 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.

HC will undertake an independent security audit annually to ensure that the systems, controls, and agreed processes in protecting data while it remains on the HC Platform are robust and in compliance with the data-related agreement with SGX. HC is also in the process of obtaining the internationally recognised ISO 27001 certification for information security management and is expected to complete this process by end of Q2 2022.

Trade Index Creation

SGX, as the provider of the global pricing benchmark for natural rubber, will work with the industry to provide greater transparency of robust pricing for various grades and origins of rubber. The digitalisation drive through the use of HC's trading platform 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.

SGX is working closely with HC to explore the creation of pricing indices based off the benchmark SICOM prices to reflect a range of origins and grades of rubber. 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. SGX will publicly release the methodology alongside the publication of the indices.

For the index to be robust and fit for purpose, a diverse range of participants along the rubber value chain, coupled with acceptable levels of transacted volume will be needed to 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 (LTCs).

Background

HeveaConnect (HC) is a Singapore-based technology provider founded in 2018 with the aim to digitalise the natural rubber supply chain while providing data-backed services for the industry. HC pioneers a sustainability dashboard, providing the global marketplace with transparency through vital data on supply chain flows. HC provides a full suite of solutions for the natural rubber industry that include factory management systems, traceability solutions, smallholder educational content and a secure B2B platform for the trading of physical rubber. Through its suite of solutions and data integrated from its users, customers are able to link key information regarding quality, traceability and sustainability to the physical rubber that is traded on the platform. The data-backed rubber generated through this process allows users of the platform to access the information up to the individual lot level.

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. This group includes seven of the top 15 tiremakers in the world and three of the top five Indonesian rubber exporters.

https://heveaconnect.com/sgx-to-develop-price-index-for-physical-natural-rubber-with-heveaconnect-platform/^[1]  

References

1. ^{^} https://heveaconnect.com/sgx-to-develop-price-index-for-physical-natural-rubber-with-heveaconnect-platform/ (heveaconnect.com)