SGX hails immediate liquidity, trading cost benefits

Changes to market infrastructure, including longer opening hours, revised minimum bid-ask spreads and a new trading engine have already reaped rewards for the Singapore Exchange, the company revealed in its Q1 2012 results presentation earlier today.
By None

Changes to market infrastructure, including longer opening hours, revised minimum bid-ask spreads and a new trading engine have already reaped rewards for the Singapore Exchange (SGX), the company revealed in its Q1 2012 results presentation earlier today.

“With these enhancements, we have broadened our user base and improved liquidity for our international and local customers,” said Magnus Bocker, chief executive of SGX.

During the period, SGX’s securities market began all day trading for the first time. Bocker said that by continuing to stay open between 12.30pm and 2.00pm – when the venue had previously closed for lunch – the exchange had seen an average daily volume increase of 9% across the first two months of its new trading hours.

“The new opening hours from 1 August have already led to increased depth in liquidity of the overall market,” said Bocker. “When India, Hong Kong and Japan extend their hours, you will see a further improvement.”

Revised minimum bid-ask spreads introduced 4 July had helped improve liquidity and, at the same time, lower market impact costs by up to 40%, according to Bocker.

On 15 August, the securities market migrated a new trading engine, which – as well as greatly improving throughput and reducing latency – is intended to improve the market’s opening and closing routines and allow the exchange to introduce both new products and a broader range of order types.

“With the new engine for securities, we are building on our platform for better capacity and more transactions per second,” said Bocker.

The SGX chief executive also said the exchange would also continue to work on improved regulation during the coming year, including circuit breakers. “We will do a lot more to strengthen the regulatory standard here in Singapore,” he said.

SGX reported a 12% increase in revenues for the first quarter of its 2012 financial year. Income was S$178 million (US$140 million) for the three months to 30 September 2011, compared with S$159 million in Q1 2011. EBITDA was 15% higher at S$115 million and earnings per share rose 18% to 8.2 cents over the same period. Net profit for the quarter was S$88 million, up from S$74 million.

Costs were S$75 million, with technology outlay accounting for 36%, reflecting the data centre and trading engine launched in August as part of SGX’s Reach initiative to increase capacity and attract high-frequency liquidity. CEO Bocker predicted that liquidity and velocity on SGX’s securities market would grow gradually in upcoming quarters as further developments, including new order types, came on stream.

Bocker added that the results provided evidence that SGX had diversified away from its traditional reliance on securities revenue, which contributed just 40% (S$72 million) to the quarter’s revenues. Derivatives trading and clearing revenues were S$9 million higher, accounting for 24% of overall revenues, on record volumes. Depository services made up 15% of quarterly revenues, largely due to increased utilisation of the SGX prime pre-matching service.

Earlier this year SGX abandoned its merger plans with the Australian Securities Exchange after the Australian government ruled that the deal was not in the national interest.

«