Beyond Asia and Iron Ore

BPI tells FOW how it is extending its services to Europe
with a new multi commodity services platform.

BPI Financial Group Limited (BPI) is an Asia based firm and part of Theme International Holdings Limited which is listed on the Hong Kong Stock Exchange. BPI is licenced in both Hong Kong and Singapore by the Securities and Futures Commission (SFC) and the Monetary Authority of Singapore (MAS), respectively, to operate listed derivatives business comprising of market access, clearing, inter-dealer brokering and contracts for difference (CfD).

BPI clears one in every four SGX iron ore trades

Since commencement of business in early 2018, with bulk commodities comprising of iron ore and steel as its anchor products, BPI has registered remarkable growth. With deliberate efforts to bring together institutional participation comprising of hedgers, market makers, proprietary trading groups and algo traders, BPI has a significant market footprint whereby it clears nearly one in every four iron ore derivative trades on the Singapore Exchange (SGX).

Even though iron ore derivatives were listed on the SGX nearly 12 years ago, it is largely a phone-based market, with only about 15% to 20% of trades being matched electronically with the rest being matched via voice brokered trades. BPI offers interdealer brokerage service facilitating price discovery in OTC iron ore markets. BPI team of derivatives and physical commodity brokers are based out of Singapore, China, London and Norway.

Bridging access to both onshore and offshore iron ore products

BPI’s compelling strength lies in being able to offer both interdealer brokerage services combined with clearing in addition to providing access to Dalian’s internationalised iron ore contract which represents domestic Chinese ore prices. The ability for customers to seamlessly benefit from price discovery in OTC markets to electronic trading access to both onshore and offshore iron ore products is what BPI refers to as a one-stop platform which anchors their core strategy.

Expanding the pie by product and geographic diversification

“One of the firm’s defining ethos has been to grow the market instead of resorting to mere market share capture”, says, Kenny Mah, CEO of BPI. "We have purposefully engaged segments within the industry that previously did not actively hedge using derivatives. Education and handholding them into the market place has helped BPI get to its current standing.”

In recent years, BPI has implemented an intentioned strategy to grow and diversify its business beyond iron ore to cover freight and the energy product suite. In line with that strategic intent, BPI has hired new team members in Singapore, China and Europe to facilitate expanding product offering.

Dominant 90% market share in Asian coal derivatives

Connecting sellers to buyers in China, India and the rest of Asia, BPI commands 90% of trades brokered for Indonesian coal derivatives. Building on that dominant position in Asia, BPI is establishing presence in western markets. Historically, trade in major coal contracts such as API2, API4 and Newcastle Coal Futures have been dominated by European counterparts. To service them better, BPI has now established presence in UK and expanded its team there with four senior hires who collectively bring years of rich and deep industry experience in furthering BPI’s offering to cover physical coal brokering in addition to coal derivatives.

BPI ranks #1 among 75 global overseas intermediaries

Growing beyond, bulk commodities, base and precious metals, BPI has a sizeable clearing business in energy contracts on ICE and CME as well as internationalised products on Shanghai Future Exchange’s International Energy Exchange (INE). As part of its one-stop platform strategy, BPI extends offshore participants access into China to the internationalised derivatives contracts. To this end, BPI is the top Overseas Intermediary (OI), standing first among 75 global OIs of INE crude oil futures according to 2021 rankings recently published by Shanghai Futures Exchange.

Speaking of alternative energy, BPI’s chief commercial officer, Fan Songhua says: “ partnering with our clients to aid the process of transition to sustainable energy. While the market for such alternative energy contracts is still in its infancy, we are seeing rising interest in hydrogen and carbon credits. These markets look likely to grow rapidly in the coming years; as companies shift towards green energy, we are in a position to facilitate their journey, riding the energy transformation wave.”

One-stop-shop strategy 

BPI’s differentiated positioning in Asia allows it to meaningfully match western trade flows against its Asian flows.

The success of this model is vindicated by its growing customer funds, which currently exceeds $600m. This has been accomplished within a short space of four years. Besides the size of these flows, Kenny explains what distinguishes BPI is its integrated service model.

”Today, organisation of firms in our sector is typically highly silo’d – with most active only in clearing or only in execution," he says. "Many a time, this is not an ideal fit for traders’ needs: when a client seeks execution for a trade, the process will also create the requirement for risk management, financing, clearing, and brokerage.”

He further adds that: “Our distinctive value-add is to provide all these services on a unified platform - which we refer to as a one-stop shop strategy - by combining OTC inter dealer brokering, trading access to global and emerging markets, clearing of listed derivatives & internationalised contracts, and facilitation of physical commodity trades. Price discovery, market access, instant clearing confirmation and collateral management – this integrated one stop shop platform meets all those needs, regardless of the market in which our clients operate.”

Describing the benefits of its one-stop strategy, Songhua further adds that “Our integrated approach removes inefficiencies – in terms of time and money – entailed by the type of distributed service provision that comes when clients have to use several different firms. It remains our guiding strategy as we seek to expand our capabilities in trading and risk management to new asset classes, including cryptocurrencies, other digital assets and equities. Regardless of where an investor is looking to source alpha, our aim is to provide seamless access via a single platform.”