This startup is leveling the playing field for forex trading

Singapore is the third-largest foreign exchange (forex) trading center in the world, trailing behind the UK and the US, with an average daily trading volume of US$633 billion.

Despite that, the actual matching of trades – where buyers are connected to sellers and vice versa – doesn’t happen in the city-state. Trades are matched only in London, New York, and Tokyo.

Because of this and due to latency hopping, executing buy-and-sell orders and then confirming that they have been done takes significantly longer for buyers and sellers who aren’t based in those cities.

“To send an order to buy or sell from Singapore to London or New York takes about 180 milliseconds. Then, you need to know whether the order was successfully done or not, and the time taken to receive a reply is another 180 milliseconds,” says Wong Joo Seng, CEO and co-founder of Singapore-based forex platform Spark Systems. “But if we were to match trades in Singapore, we could reduce the time from 360 milliseconds to just 1 millisecond.”

A way to democratize forex trading

Though 360 milliseconds may not sound like a lot of time, it makes all the difference when forex markets become volatile due to major Western events such as Brexit or presidential elections in the US.

“It becomes very difficult to transact,” says Wong. “By the time you see a buying price here and try to execute that, parties in London and New York that are much closer and have a much quicker execution time would have the advantage, while everyone based here would be at a disadvantage.”

Wong’s desire to make Singapore a major trading center inspired him to launch Spark Systems in 2016. The platform operates at low latencies, enabling local hedge funds, banks, and brokerages to execute trades on the platform at high speeds.

(L-R) Spark Systems co-founders Ye Ting Song, Wong Joo Seng, and Jason Wang. / Photo credit: Spark Systems

According to the founder, this isn’t just a boon to traders in Singapore: Buyers and sellers from neighboring countries such as Indonesia, Malaysia, the Philippines, Thailand, and the rest of Southeast Asia are also able to execute trades at much faster speeds.

On top of its low-latency capabilities, Spark Systems’ “next-generation” platform is also cheaper to use compared to other forex platforms, most of which, Wong says, were built in the early 2000s.

“I used to trade about US$2 trillion a year on average and I earned an income of US$25 million in revenue, but paid US$10 million of that to trading platforms,” he recalls. “I felt that 40 cents on every dollar I earned on revenue was a very high transaction cost.”

With Spark Systems, Wong says firms can save 50% on bills that cost millions of dollars, when trading volumes are in the billions and trillions.

Bringing in the banks

But building Spark Systems’ platform wasn’t easy. Wong credits part of the company’s success to its collaboration with the Monetary Authority of Singapore (MAS), which, like Spark Systems, had the vision of further developing Singapore into a forex trading hub.

The partnership saw the startup engaging reputable banks to set up forex operations in Singapore. MAS would then defray the cost for these banks to operate locally as an incentive for them to set up in the city-state.

We’re almost there, we need maybe just another two or three more [banks]. Then, the floodgates will open.

According to Wong, the move surprised the banks, with some even approaching him to verify MAS’s defrayment of their costs because “they hadn’t seen this kind of offer anywhere else.”

After a year of conversations, Union Bank of Switzerland was the first bank to agree. Within months, several others came on board as well.

“We’re almost there, we need maybe just another two or three more [banks],” says Wong. “Then, the floodgates will open and Singapore will become a major center for banks to trade forex.”

Getting recognition

Spark Systems’ association with MAS has lent it a lot of credibility as a legitimate forex player, which is due especially to the latter being regarded as “one of the most respected central banks in the world.”

“That was how a young company with very little corporate reputation gained some kind of gravitas and standing within the international community,” adds Wong.

Another way Spark Systems sought to gain a good reputation as a forex platform was to participate in the Infocomm Media Development Authority’s SG:D Techblazer Awards, Singapore’s highest accolade for tech innovation. Singapore’s highest accolade for tech innovation. Spark Systems won the Bronze Award in the Most Promising Innovation category in SG:D Techblazer Awards 2019.

The Spark Systems team. / Photo credit: Spark Systems

“It gave us massive publicity in a very positive way and helped get our name out there,” Wong says. He adds that without the award, public recognition would have been difficult to achieve because of the company’s business-to-business nature. “The only people who knew us were specialists and expert users of forex.”

Wong also says that participating in the Techblazer Awards was helpful in validating Spark Systems’ business model and the tech behind its platform.

“It was one of the awards that looked very closely at the company, not just at the peripheral of what the company wants to do,” he says. “It also looked into how well we’ve been doing, when our product was built, how much traction we got, what kind of volumes we were seeing – and those were very important questions.”

Participation in such awards can be very helpful, Wong adds, especially for fledgling businesses looking to make a name for themselves.

“Gaining visibility is part and parcel of growing a young company,” he concludes.

The SG:D Techblazer Awards is Singapore’s highest accolade for tech innovation. It aims to recognize and endorse companies based in the city-state that exemplify the spirit of innovation in the development of tech solutions.

If your company is developing innovative ways of solving problems or doing business, nominate your firm for this year’s Techblazer Awards. Visit its website to learn more.

This content was produced by Tech in Asia Studios, which connects brands with Asia’s tech community. Learn more about partnering with Tech in Asia Studios.